New vehicle sales are expected to increase during by more than 3% in May, reflecting the strong showing by General Motors and Fiat Chrysler Automobiles N.V., according to new monthly forecasts, but the overall sales rate is falling behind the pace in 2017.
Cox Automotive predicted that overall, U.S. new-vehicle sales in May 2018 are expected to increase 3.1% compared to May 2017. The seasonally adjusted annual rate or SAAR, projected at 16.6 million for this month, is expected to fall to its lowest level since August 2017.
The Cox forecast 16.6 million SAAR is down slightly from the 16.7 million level in May 2017, and down from the 17.1 million pace the market has been averaging in 2018.
Charles Chesbrough, Cox chief economist, said that May could become the first month where the SAAR drops below 17 million units since August 2017 when Hurricane Harvey slammed Houston, one of largest and vibrant new-vehicle markets in the United States.
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Edmunds predicts that 1.6 million new cars and trucks will be sold in the U.S. in May for an estimated seasonally adjusted annual rate of 16.7 million. This reflects a 16% increase in sales from April 2018 and a 3.5% increase from May 2017, Edmunds said.
“The summer selling season is off to a healthy start,” said Jeremy Acevedo, Edmunds manager of industry analysis. “Despite rising gas prices, shoppers are clearly demonstrating their confidence in the strength of the economy as they continue to seek out larger, more expensive vehicles.”
Edmunds experts note that Memorial Day sales events could contribute to this lift as well. The forecast came before a tropical storm impacted weather in the Southeastern United States.
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“Inventories of in-demand vehicles such as light trucks are still running high, so automakers are motivated to make this holiday weekend sales event count,” Acevedo said. “Depending on how shoppers respond, this could set the trend for even sweeter deals as we head deeper into the year.”
New vehicle sales felt the pressure last month from a combination of rising interest rates and higher fuel prices as Ford, Toyota, Nissan and Honda all reported declining sales for April.
Only Fiat Chrysler and Volkswagen went against the prevailing trend in April, which was also the first month without a sales report from General Motors. The consensus was that GM sales dropped during April.
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Edmunds, the car buying service, noted in April, interest rates on new vehicle loans remained at elevated levels not seen since before the 2009 recession. According to the analysts at Edmunds, the annual percentage rate on new financed vehicles averaged 5.6% in April, marking the third straight month rates soared above 5%. This compares to an average APR of 5% in April 2017 and 4.2% in April 2013.