Record low sales and high prices, profits in August: J.D. Power

Low sales and inventory, high prices and profits is the continued situation for dealers in the U.S., a condition that will probably persist into the new year, says a new joint forecast from J.D. Power and LMC Automotive.

“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,” said Andrew King, president of the data and analytics division at J.D. Power. “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 fulfil 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.”

Retail sales of new vehicles this month are expected to reach 980,400 units, a 2.6% decrease compared with August 2021 when adjusted for selling days. 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. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 13.3 million units, up 0.2 million units from 2021.

“For August, new-vehicle prices continue to set records, with the average transaction price expected to reach $46,259—an 11.5% increase from a year ago and the highest on record. Therefore, even though the sales pace is down 2.6% year over year, buyers will still spend nearly $45.4 billion on new vehicles this month, the second-highest level ever for the month of August and up 13.0% from August 2021.”

The report noted that August 2021 was the first month where inventory shortages had a significant influence on new-vehicle sales. Consequently, the year-over-year sales decline for August 2022 is smaller than it has been in recent months, whereas sales in August 2021 were more reflective of actual consumer demand.

Higher prices coupled with a rising interest rate environment are leading to monthly loan payments reaching new all-time highs. “The increase in monthly loan payments would be greater were it not for the ongoing strength of used-vehicle prices, which increases the amount of trade-in equity that new-vehicle buyers are bringing to their next purchase,” said King. “Total retailer profit per unit—inclusive of grosses and finance and insurance income—is on pace to reach a monthly record of $4,976, an increase of $639 from a year ago.

“In September, the constraints are expected to continue with sales being hampered by available inventory. In the near term, prices and per-unit profitability will remain strong,” he said.

Related Articles
Share via
Copy link