An affordability crisis is stalking the industry. Click to Enlarge.
New-vehicle retail sales for August 2022 are forecast to decline when compared with August 2021, according to a joint release today from J.D. Power and LMC Automotive*. Retail sales of new vehicles August are expected to reach 980,400 units, a 2.6% decrease compared with August 2021 when adjusted for selling days. August 2022 has one additional selling day compared with August 2021. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 1.3% from 2021.
Higher prices along with a rising interest rates are leading to monthly loan payments reaching new all-time highs. After breaking $700 for the first time ever in July, the average monthly finance payment in August is forecast to hit a record $716, up $78 from August 2021. That translates to a 12.2% increase in monthly payments from a year ago, which is above the 11.5% increase in transaction prices.
The average interest rate for new-vehicle loans is expected to increase 137 basis points from a year ago to 5.51%. Worse, monthly loan payments would be higher if not for ongoing soaring used-vehicle prices. This, of course, increases the amount of trade-in equity that new-vehicle buyers use on their next purchase. “The average trade-in equity for August is trending toward a near-record high of $10,011, a 32.7% increase from a year ago and the third consecutive month above $10,000,” Power said.
Total new-vehicle sales for August 2022, including retail and non-retail transactions, are projected to reach 1,136,800 units, a 0.6% increase from August 2021. Comparing the sales volume without adjusting for the number of selling days translates to an increase of 4.6% from 2021. The seasonally adjusted annualized rate, the so-called SAAR, for total new-vehicle sales is expected to be 13.3 million units, up 0.2 million units from 2021. (AutoInformed on: US July Sales Forecast Down. Prices, Profits Still Records)
“Traditionally, August is a high-volume sales month as manufacturers launch marketing actions to clear out the last model-year vehicles and start sales of the new model-year products. This August, the industry is still constrained by insufficient inventory to meet robust consumer demand. The result is a retail sales pace that fails to fulfill its potential. However, the silver lining for retailers – and manufacturers – [but not consumers – AutoCrat] is that transaction prices and profits are continuing to reach record levels even in the face of rising interest rates,” said Thomas King, president of the data and analytics division at J.D. Power.
“The lack of inventory, coupled with strong demand, continues to allow manufacturers to walk back discounts. The average incentive spend per vehicle is tracking toward $969, a decrease of 47.1% from a year ago. This will mark the fourth consecutive month under $1,000. Incentive spending per vehicle expressed as a percentage of the average vehicle MSRP is trending at 2.0%, down 2.3 percentage points from August 2021. One of the factors contributing to the reduction in incentive sending is the absence of discounts on vehicles that are leased. This month, leasing will account for just 17% of retail sales. In August 2019, leases accounted for 29% of all new-vehicle retail sales,” said King.
LMC Automotive
*LMC Automotive is a leading independent and exclusively automotive focused provider of global forecasting and market intelligence in the areas of vehicle sales, production, powertrains and electrification. The company’s client base from around the globe includes car and truck makers, component manufacturers and suppliers, financial, logistics and government institutions. LMC Automotive is part of the LMC group. LMC is the world’s leading economic and business consultancy for the agribusiness sector. For more information about LMC Automotive, visit www.lmc-auto.com.
US Retail New Vehicle Sales to Decline in July. Prices Up
An affordability crisis is stalking the industry. Click to Enlarge.
New-vehicle retail sales for August 2022 are forecast to decline when compared with August 2021, according to a joint release today from J.D. Power and LMC Automotive*. Retail sales of new vehicles August are expected to reach 980,400 units, a 2.6% decrease compared with August 2021 when adjusted for selling days. August 2022 has one additional selling day compared with August 2021. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 1.3% from 2021.
Higher prices along with a rising interest rates are leading to monthly loan payments reaching new all-time highs. After breaking $700 for the first time ever in July, the average monthly finance payment in August is forecast to hit a record $716, up $78 from August 2021. That translates to a 12.2% increase in monthly payments from a year ago, which is above the 11.5% increase in transaction prices.
The average interest rate for new-vehicle loans is expected to increase 137 basis points from a year ago to 5.51%. Worse, monthly loan payments would be higher if not for ongoing soaring used-vehicle prices. This, of course, increases the amount of trade-in equity that new-vehicle buyers use on their next purchase. “The average trade-in equity for August is trending toward a near-record high of $10,011, a 32.7% increase from a year ago and the third consecutive month above $10,000,” Power said.
Total new-vehicle sales for August 2022, including retail and non-retail transactions, are projected to reach 1,136,800 units, a 0.6% increase from August 2021. Comparing the sales volume without adjusting for the number of selling days translates to an increase of 4.6% from 2021. The seasonally adjusted annualized rate, the so-called SAAR, for total new-vehicle sales is expected to be 13.3 million units, up 0.2 million units from 2021. (AutoInformed on: US July Sales Forecast Down. Prices, Profits Still Records)
“Traditionally, August is a high-volume sales month as manufacturers launch marketing actions to clear out the last model-year vehicles and start sales of the new model-year products. This August, the industry is still constrained by insufficient inventory to meet robust consumer demand. The result is a retail sales pace that fails to fulfill its potential. However, the silver lining for retailers – and manufacturers – [but not consumers – AutoCrat] is that transaction prices and profits are continuing to reach record levels even in the face of rising interest rates,” said Thomas King, president of the data and analytics division at J.D. Power.
“The lack of inventory, coupled with strong demand, continues to allow manufacturers to walk back discounts. The average incentive spend per vehicle is tracking toward $969, a decrease of 47.1% from a year ago. This will mark the fourth consecutive month under $1,000. Incentive spending per vehicle expressed as a percentage of the average vehicle MSRP is trending at 2.0%, down 2.3 percentage points from August 2021. One of the factors contributing to the reduction in incentive sending is the absence of discounts on vehicles that are leased. This month, leasing will account for just 17% of retail sales. In August 2019, leases accounted for 29% of all new-vehicle retail sales,” said King.
LMC Automotive
*LMC Automotive is a leading independent and exclusively automotive focused provider of global forecasting and market intelligence in the areas of vehicle sales, production, powertrains and electrification. The company’s client base from around the globe includes car and truck makers, component manufacturers and suppliers, financial, logistics and government institutions. LMC Automotive is part of the LMC group. LMC is the world’s leading economic and business consultancy for the agribusiness sector. For more information about LMC Automotive, visit www.lmc-auto.com.