The average monthly payment gap between new and used vehicles continues to increase.
US auto sales in June finish up at a SAAR of 17 million units, which would represent roughly a 1-2% decrease from June of last year, according to the National Automobile Dealers Association. This would be the third month this year with a SAAR of 17 million units or more. The U.S. light-vehicle SAAR for the first half of the year is expected to be 17.0 million units, according to GM Chief Economist Elaine Buckberg. Light trucks will account for more than 70% of all new vehicles sold.
“Sales have declined relative to 2018 each month this year, but overall, not more than we expected,” said Patrick Manzi, senior economist NADA. Transaction prices on both cars and light trucks continued to rise and set new records. According to the latest NADA Average Dealership Financial Profile Series from April 2019, the average new-vehicle transaction price was $36,642, up 3.3% compared to this time last year.
Transaction prices on used vehicles sold by franchised dealers have also risen. “The average used-vehicle transaction price in April was $20,979, up 3.8% compared to this time last year. The average monthly payment gap between new and used vehicles continues to increase, which will likely result in more consumers shifting to the used market,” predicts Manzi.
Incentive spending fell in April but picked back up in May. Compared to last year, average incentive levels were lower each month this year except for May. According to J.D. Power, average incentive spending in May was $3,816 per vehicle, an increase of $12 compared to last year. “If inventory levels get to too high, we will see incentive spending pick up to help clear out dealer lots,” said Manzi.
Trends
“We expect that off-lease vehicle returns will peak over the summer months and will total more than 4 million units this year. Off-lease inventories will remain robust over the next few years due to high leasing penetrations over the past few years. As prices continue to climb on the new vehicle side for both loans and leases, more and more consumers will shift the used vehicle market. Low vehicle sales during the Great Recession have resulted in supply constraints of older and lower priced vehicles, which will cause prices at the lower end of the spectrum to remain elevated in the near term,” said Manzi.
“The Fed has signaled that we will not see any interest rate increases in 2019 and some believe that we may even see an interest rate cut of 25 basis points before the end of the summer. This will help slow the monthly payment creep that we saw in 2018. Payments will still likely increase throughout the remainder of the year because of rising vehicle costs, but we won’t have the added pressure of cost increases coming from rising interest rates. We have seen credit standards tightening in recent months with a larger share of auto loans being made to more creditworthy customers. We expect that this will continue throughout the year as well,” said Manzi.
About Ken Zino
Ken Zino, editor and publisher of AutoInformed, is a versatile auto industry participant with global experience spanning decades in print and broadcast journalism, as well as social media. He has automobile testing, marketing, public relations and communications experience. He is past president of The International Motor Press Assn, the Detroit Press Club, founding member and first President of the Automotive Press Assn. He is a member of APA, IMPA and the Midwest Automotive Press Assn.
He also brings an historical perspective while citing their contemporary relevance of the work of legendary auto writers such as Ken Purdy, Jim Dunne or Jerry Flint, or writers such as Red Smith, Mark Twain, Thomas Jefferson – all to bring perspective to a chaotic automotive universe.
Above all, decades after he first drove a car, Zino still revels in the sound of the exhaust as the throttle is blipped during a downshift and the driver’s rush that occurs when the entry, apex and exit points of a turn are smoothly and swiftly crossed. It’s the beginning of a perfect lap.
AutoInformed has an editorial philosophy that loves transportation machines of all kinds while promoting critical thinking about the future use of cars and trucks.
Zino builds AutoInformed from his background in automotive journalism starting at Hearst Publishing in New York City on Motor and MotorTech Magazines and car testing where he reviewed hundreds of vehicles in his decade-long stint as the Detroit Bureau Chief of Road & Track magazine. Zino has also worked in Europe, and Asia – now the largest automotive market in the world with China at its center.
NADA Predicts Q2 2019 US Auto Sales Will be Down Again
The average monthly payment gap between new and used vehicles continues to increase.
US auto sales in June finish up at a SAAR of 17 million units, which would represent roughly a 1-2% decrease from June of last year, according to the National Automobile Dealers Association. This would be the third month this year with a SAAR of 17 million units or more. The U.S. light-vehicle SAAR for the first half of the year is expected to be 17.0 million units, according to GM Chief Economist Elaine Buckberg. Light trucks will account for more than 70% of all new vehicles sold.
“Sales have declined relative to 2018 each month this year, but overall, not more than we expected,” said Patrick Manzi, senior economist NADA. Transaction prices on both cars and light trucks continued to rise and set new records. According to the latest NADA Average Dealership Financial Profile Series from April 2019, the average new-vehicle transaction price was $36,642, up 3.3% compared to this time last year.
Transaction prices on used vehicles sold by franchised dealers have also risen. “The average used-vehicle transaction price in April was $20,979, up 3.8% compared to this time last year. The average monthly payment gap between new and used vehicles continues to increase, which will likely result in more consumers shifting to the used market,” predicts Manzi.
Incentive spending fell in April but picked back up in May. Compared to last year, average incentive levels were lower each month this year except for May. According to J.D. Power, average incentive spending in May was $3,816 per vehicle, an increase of $12 compared to last year. “If inventory levels get to too high, we will see incentive spending pick up to help clear out dealer lots,” said Manzi.
Trends
“We expect that off-lease vehicle returns will peak over the summer months and will total more than 4 million units this year. Off-lease inventories will remain robust over the next few years due to high leasing penetrations over the past few years. As prices continue to climb on the new vehicle side for both loans and leases, more and more consumers will shift the used vehicle market. Low vehicle sales during the Great Recession have resulted in supply constraints of older and lower priced vehicles, which will cause prices at the lower end of the spectrum to remain elevated in the near term,” said Manzi.
“The Fed has signaled that we will not see any interest rate increases in 2019 and some believe that we may even see an interest rate cut of 25 basis points before the end of the summer. This will help slow the monthly payment creep that we saw in 2018. Payments will still likely increase throughout the remainder of the year because of rising vehicle costs, but we won’t have the added pressure of cost increases coming from rising interest rates. We have seen credit standards tightening in recent months with a larger share of auto loans being made to more creditworthy customers. We expect that this will continue throughout the year as well,” said Manzi.
About Ken Zino
Ken Zino, editor and publisher of AutoInformed, is a versatile auto industry participant with global experience spanning decades in print and broadcast journalism, as well as social media. He has automobile testing, marketing, public relations and communications experience. He is past president of The International Motor Press Assn, the Detroit Press Club, founding member and first President of the Automotive Press Assn. He is a member of APA, IMPA and the Midwest Automotive Press Assn. He also brings an historical perspective while citing their contemporary relevance of the work of legendary auto writers such as Ken Purdy, Jim Dunne or Jerry Flint, or writers such as Red Smith, Mark Twain, Thomas Jefferson – all to bring perspective to a chaotic automotive universe. Above all, decades after he first drove a car, Zino still revels in the sound of the exhaust as the throttle is blipped during a downshift and the driver’s rush that occurs when the entry, apex and exit points of a turn are smoothly and swiftly crossed. It’s the beginning of a perfect lap. AutoInformed has an editorial philosophy that loves transportation machines of all kinds while promoting critical thinking about the future use of cars and trucks. Zino builds AutoInformed from his background in automotive journalism starting at Hearst Publishing in New York City on Motor and MotorTech Magazines and car testing where he reviewed hundreds of vehicles in his decade-long stint as the Detroit Bureau Chief of Road & Track magazine. Zino has also worked in Europe, and Asia – now the largest automotive market in the world with China at its center.