With dealers finally rebuilding inventories, sales of new vehicles for October 2022 are expected to increase by double digits when compared with October 2021.
The increase is expected despite rising interest rates, according to a joint forecast from J.D. Power and LMC Automotive. Wards Automotive reported earlier this month dealer inventories a steadily climbing, helping boost retail sales.
Sales climbing
J.D. Power predicted this week retail sales of new vehicles this month are expected to reach 1,008,200 units, a 12.1% increase compared with last October. This year, October has one fewer selling day compared with the year-ago period. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 8% from 2021.
Total new-vehicle sales for October 2022, including retail and non-retail transactions, are projected to reach 1,157,900 units, a 15.2% increase from October 2021. Comparing the sales volume without adjusting for the number of selling days translates to an increase of 10.9% from 2021.
Thomas King, president of the data and analytics division at J.D. Power, said, “October results show that new-vehicle inventory levels are experiencing modest improvement with month-end retail units expected to exceed 1 million units for the first time since May 2021.”
Lean inventories still holding industry back
King said the result is a retail sales pace that shows a meaningful increase from a year ago but still falls below its potential due to historically lean vehicle availability.
Dealer profit per unit continues to modestly soften from its peak — down just more than $500 from a few months ago but still over double of what they were pre-pandemic, he said.
“As expected, with an increase in supply, several financial indicators are seeing a ‘cooling off’ from the heated growth rates earlier this year — but the industry’s financial health is still positive. Also due to the rise in sales volumes accompanied by near record level transaction prices, retailers in aggregate, will experience the second most profitable October on record,” King said.
“Although rising interest rates continue to put pressure on affordability, buyers spent more money on new vehicles this month than any previous October. Overall, we expect to see some deterioration in per unit pricing and profitability in the coming months, however, nearly 50% of new vehicles are still being sold above MSRP, the industry is recalibrating to a more durable pricing environment.”
However, dealerships are continuing to pre-sell vehicles in their delivery pipeline. This month, 52% of vehicles will be sold within 10 days of arriving at a dealership, while the average number of days a new vehicle is in a dealer’s possession before being sold is on pace to be 19 days — down from 20 days a year ago.