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New-vehicle retail sales for January 2022 are predicted to decline when compared with January 2021, according to a joint forecast from J.D. Power and LMC Automotive. Retail sales of new vehicles this month are expected to reach 828,900 units, an 8.3% decrease compared with January 2021*. Total new-vehicle sales for January 2022, including retail and non-retail transactions, are projected to reach 932,100 units, a -15.6% decrease from January 2021. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 14.1 million units, a drop of 2.6 million units from 2021.
The automotive economy is continuing to grow stronger under the Biden Administration recovery. Consumers will spend ~$37.2 billion on new vehicles this month, the highest on record for the month of January and 10% above January 2020. The distribution of of the benefits of that growth is uneven and tilted toward the wealthier.
“Despite optimism towards the end of 2021 that diminishing supply chain disruption would result in more vehicles being delivered to dealerships, the new-vehicle supply situation has shown no meaningful improvement. January month-end retail inventory is expected to be below one million units for the eighth consecutive month. The volume of new vehicles being delivered to dealerships in January has been insufficient to meet strong consumer demand, resulting in a significantly diminished sales pace,” said Thomas King, president of the data and analytics division at J.D. Power.
The forecast considers that new-vehicle prices continue to be at record levels. Average transaction prices are expected to reach a January record of $44,905. Inventory shortages are resulting in even fewer incentive offers from manufacturers. The average manufacturer incentive spend per vehicle is on pace to be $1,319, a decrease of $2,163 from a year ago. Expressed as a percentage of the average vehicle MSRP, incentives for January are trending toward a record low of 2.9%, down nearly 5.2 percentage points from a year ago and the first time below 3.0%.
“Dealers also are continuing to benefit from high transaction prices with total retailer profit per unit—inclusive of grosses and finance & insurance income—being on pace to reach a $5,138, an increase of $2,969 from a year ago and the fourth consecutive month above $5,000. The gains in per-unit profit are offsetting the drop in sales volume as the total aggregate retailer profit from new-vehicle sales is projected to be up 117% from January 2021, reaching $4.3 billion,” said King.
“Record new-vehicle prices are being supported by exceptionally strong used-vehicle prices, as new-vehicle buyers benefit from more equity on their trade-in vehicles. The average trade-in equity for January is trending towards $9,852, an 88% increase of $4,611 from a year ago. Also, interest rates are favorable when compared with a year ago. The average interest rate for loans in January is expected to decrease 14 basis points to 4.14%. Even with lower interest rates and increased trade-in values, the average monthly finance payment is on pace to hit a record high for the month of January of $669, up $73 from January 2021,” said King.
The next forecast based on this forecast means that February will likely be another month of suppressed sales volume offset by near record levels of pricing and profitability.
*January 2022 has the same number of selling days as January 2021.
January US New Vehicle Sales to Decline. Profits, Prices Up
Click to Enlarge.
New-vehicle retail sales for January 2022 are predicted to decline when compared with January 2021, according to a joint forecast from J.D. Power and LMC Automotive. Retail sales of new vehicles this month are expected to reach 828,900 units, an 8.3% decrease compared with January 2021*. Total new-vehicle sales for January 2022, including retail and non-retail transactions, are projected to reach 932,100 units, a -15.6% decrease from January 2021. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 14.1 million units, a drop of 2.6 million units from 2021.
The automotive economy is continuing to grow stronger under the Biden Administration recovery. Consumers will spend ~$37.2 billion on new vehicles this month, the highest on record for the month of January and 10% above January 2020. The distribution of of the benefits of that growth is uneven and tilted toward the wealthier.
“Despite optimism towards the end of 2021 that diminishing supply chain disruption would result in more vehicles being delivered to dealerships, the new-vehicle supply situation has shown no meaningful improvement. January month-end retail inventory is expected to be below one million units for the eighth consecutive month. The volume of new vehicles being delivered to dealerships in January has been insufficient to meet strong consumer demand, resulting in a significantly diminished sales pace,” said Thomas King, president of the data and analytics division at J.D. Power.
The forecast considers that new-vehicle prices continue to be at record levels. Average transaction prices are expected to reach a January record of $44,905. Inventory shortages are resulting in even fewer incentive offers from manufacturers. The average manufacturer incentive spend per vehicle is on pace to be $1,319, a decrease of $2,163 from a year ago. Expressed as a percentage of the average vehicle MSRP, incentives for January are trending toward a record low of 2.9%, down nearly 5.2 percentage points from a year ago and the first time below 3.0%.
“Dealers also are continuing to benefit from high transaction prices with total retailer profit per unit—inclusive of grosses and finance & insurance income—being on pace to reach a $5,138, an increase of $2,969 from a year ago and the fourth consecutive month above $5,000. The gains in per-unit profit are offsetting the drop in sales volume as the total aggregate retailer profit from new-vehicle sales is projected to be up 117% from January 2021, reaching $4.3 billion,” said King.
“Record new-vehicle prices are being supported by exceptionally strong used-vehicle prices, as new-vehicle buyers benefit from more equity on their trade-in vehicles. The average trade-in equity for January is trending towards $9,852, an 88% increase of $4,611 from a year ago. Also, interest rates are favorable when compared with a year ago. The average interest rate for loans in January is expected to decrease 14 basis points to 4.14%. Even with lower interest rates and increased trade-in values, the average monthly finance payment is on pace to hit a record high for the month of January of $669, up $73 from January 2021,” said King.
The next forecast based on this forecast means that February will likely be another month of suppressed sales volume offset by near record levels of pricing and profitability.
*January 2022 has the same number of selling days as January 2021.