You’re out of luck if you were hoping that manufacturers would offer incentives to clear out cars from the 2022 model year.
“The lack of inventory, coupled with strong demand, continues to allow manufacturers to walk back discounts,” said Thomas King, president of the data and analytics division at J.D. Power.
According to a J.D. Power and LMC Automotive survey released Wednesday, supplies are still scarce and prices are still high. This month, new car retail sales are anticipated to total 980,400 units, a 2.6% decline from August 2021 when adjusted for selling days. August 2022 has one additional selling day compared with August 2021.
Sales of new vehicles, including retail and non-retail transactions, are anticipated to total 1,136,800 units in August 2022, an increase of 0.6% from August 2021. Without accounting for the number of selling days, sales volume results increased 4.6% from 2021.
“The industry is still constrained by insufficient inventory to meet robust consumer demand,” said King. “The result is a retail sales pace that fails to fulfill its potential. However, the silver lining for retailers — and manufacturers — is that transaction prices and profits are continuing to reach record levels even in the face of rising interest rates.”
Sales remain strong despite headwinds
August is expected to close with a retail inventory below 900,000 units for the 10th consecutive month with a sizable percentage of cars sold before they reach the showroom. The average number of days a new car stays in a dealer’s hands before being sold is on pace to be 20 days — down from 25 days a year ago. This month, 55% of vehicles will be sold within 10 days of arriving at a dealership.
The torrid pace of car sales comes despite the average transaction price expected to reach $46,259, up 11.5% from a year ago and a new record. OEM incentive spending is forecast to be $969 per vehicle, down 47.1% from a year ago, and the fourth consecutive month where it was less than $1,000.
That translates into spending per vehicle as a percentage of the average vehicle MSRP is 2%, down 2.3% from August 2021. The decline comes from fewer lease deals, which has impacted the number of vehicles being leased. For August, it’s forecast to be 17% of new vehicles sales, down from 29% in August 2019.
Truck/SUV incentive spending is anticipated to be on average $1,011, down $787 from a year ago, while automobile incentive spending is anticipated to be $818, down $1,136. Truck/SUVs are on pace to account for 78.4% of new-vehicle retail sales in August.
Hitting consumers’ wallets
August’s average monthly loan payment is projected to reach a record $716, an increase of $78 or 12.2% from August 2021. Average trade-in prices also reached a new high, averaging $10,011, a 32.7% increase from a year ago and the third month where it hovered above $10,000.
The high prices and lack of discounts means that retailers are profiting more than ever, with dealers averaging a profit of $4,976 per vehicle, up $639 from a year ago.
The report forecasts a SAAR of 13.3 million units.
Similarly, Cox Automotive, whose software underpins most new car dealers, projects a SAAR of 13.3 million units. August’s new-vehicle sales are anticipated to be significantly slower rate compared to a year ago as the supply of new vehicles is mostly unchanged.
“New-vehicle inventory remains essentially unchanged since tight inventory started severely limiting sales in July 2021,” said Cox Automotive Senior Economist Charlie Chesbrough.
“The headwinds to a sales recovery this year are growing as buying conditions worsen. Rising interest rates and historically low consumer sentiment are keeping many potential buyers out of the new-vehicle market. And high prices for both gasoline and vehicles are making affordability an even greater challenge. However, the lack of supply is the biggest obstacle over the near term, and there is little evidence of new-vehicle supply returning to a healthier level.”
But Cox Automotive reported earlier this month that the average transaction price of a new vehicle set a new record of $48,182 in July 2022, up 11.9% year-over-year, a percentage similar to that of the J.D. Power and LMC Automotive report.
In the end, it points to a new car market that continues to see prices skyrocket.