Auto Insurance Rates Continue to Climb
Despite a significant slowdown in overall inflation, auto insurance rates continue to rise. According to the latest data, the consumer price index (CPI) rose only 2.5% in August 2024 compared to the same month the previous year. However, auto insurance costs jumped by 16.5% during the same period.
This data comes amid broader economic shifts. U.S. inflation has cooled to its lowest level in three years, potentially providing some relief to consumers. While the CPI increased in August, the year-over-year rise was the smallest since January 2021.
Inflation Trends
The Bureau of Labor Statistics (BLS) reported the CPI’s 2.5% increase in August, down from 2.9% in July. Core CPI, which excludes volatile food and energy prices, saw a 3.2% year-over-year increase, slightly higher than forecasts.
Key economic indicators showed mixed results: the food index increased 0.1%, while the energy index fell by 0.8%, helping to moderate overall inflation. However, housing costs continued to climb, with the shelter index increasing by 0.5% and rent indices also showing continued growth.
Auto Insurance vs. Car Prices
While auto insurance costs are climbing, the automotive sector offers some positive news. The index for used cars and trucks decreased by 10.4% compared to August 2023. Data from Kelley Blue Book indicates that transaction prices for new cars decreased year-over-year due to higher inventory levels. Incentives also reached their highest levels since early 2021.
The average transaction price (ATP) for a new car in August was $47,870, down 0.6% from July’s revised figure of $48,166. Incentive levels rose to 7.2% of the ATP, a notable increase from 7.0% in July and 4.8% in August 2023.
Incentives and Vehicle Brands
Stellantis brands, including Chrysler, Ram, and Jeep, saw some of the most significant shifts in incentives. These brands moved from below-average incentives in July to above-average levels in August. Conversely, incentives for Dodge vehicles fell, dropping from 6.9% to 5.6%.
Electric vehicles (EVs) also had substantial incentive growth, with August reaching 13.3% of ATP. EV prices, which had remained relatively stable month-over-month, saw incentives that were more than 80% higher than traditional internal combustion engine (ICE) models.
With new-vehicle inventories up more than 40% compared to last year, consumers benefited from increased choice and discounts. Brands such as Porsche, Land Rover, and Lexus continued to provide the lowest incentives, while Buick, Lincoln, and Mitsubishi offered higher-than-average discounts.
Popular segments such as compact SUVs saw incentives averaging 9.2% of ATP, and full-size pickups hit 8.4% of ATP. Dealers are leveraging higher incentives to combat sluggish sales. This trend toward lower vehicle prices is expected to continue in the coming months, particularly as consumers seek better deals in an uncertain economic climate.
