Total new-vehicle sales for May 2024, including retail and non-retail transactions, are projected to reach 1,446,800 units, a 2.9 percent increase from May 2023 on a selling day adjusted basis, according to a joint forecast from J.D. Power and GlobalData.
Comparing the same sales volume without adjusting for the number of selling days— May 2024 had one more than last year—translates to an increase of 7 percent from a year ago.
The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 16.1 million units, up 0.5 million units from May 2023.
Retail sales of new vehicles are expected to reach 1,187,000 units, a 4.4 percent increase on a selling day adjusted basis. Comparing the same sales volume without adjusting for the number of selling days translates to an increase of 8.6 percent from 2023.
May Mixed Bag
Thomas King, president of the data and analytics division at J.D. Power, said expected new-vehicle sales results for May represent a mixed bag of outcomes as the total sales pace will exceed 16 million units for the first time this year.
“Discounts are similar to last month, despite May being a month in which discounts traditionally increase to take advantage of elevated shopping activity during the Memorial Day weekend,” said King in a press statement. “This is good news for manufacturer and retailer profitability.”
But the buildup of new vehicle on lots continues to grow. Retail inventory is projected to finish around 1.8 million units, a 0.6 percent increase from April 2024 and a 52.7 percent increase from May 2023. Transaction prices are trending towards $45,033—down $1,045 or 2.3 percent—from May 2023.
Inventory Issues
“The industry continues to produce more vehicles than are being sold, leading to rising inventories and increasing the likelihood of elevated discounts as the year progresses,” noted King. “The average new-vehicle retail transaction price is declining compared with a year ago as manufacturer incentives rise, retailer profit margins fall and availability of lower-priced vehicles increases.”
Rising inventory means fewer vehicles are being pre-sold by retailers, with more shoppers able to buy directly off dealer lots, according to J.D. Power. As a result, 33.3 percent of vehicles are forecasted to sell within 10 days of arriving at the dealership, down from a peak of 58 percent in March 2022. The average time a new vehicle remains in the dealer’s possession before sale is expected to be 40 days, up from 29 days a year ago.
The combination of slightly higher retail sales but lower transaction prices means shoppers are on track to spend nearly $50.9 billion on new vehicles this month—6.8 percent higher than May 2023 and the second highest May on record.
Key Data Points
Among the other details for projected May sales were:
- Average incentive spending per unit in May is expected to reach $2,640, up from $1,782 in May 2023. Spending as a percentage of the average MSRP is expected to increase to 5.3 percent, up 1.7 percentage points from May 2023.
- Average incentive spending per unit on trucks/SUVs in May is expected to be $2,710, up $877 from a year ago, while the average spending on cars is expected to be $2,341, up $767 from a year ago.
- Trucks/SUVs are on pace to account for 80.6 percent of new-vehicle retail sales in May.
Total aggregate retailer profit from new-vehicle sales for this month is projected to be $2.8 billion, down 21.5 percent from May 2023. Retailer profit per unit is expected to be $2,471, down 31.5% from May 2023.
“Rising inventory is the primary factor behind the profit decline and fewer vehicles are selling above the manufacturer’s suggested retail price (MSRP),” said King. “Thus far in May, only 14.9 percent of new vehicles have been sold above MSRP, which is down from 29.2 percent in May 2023.”
Discounts, Lease Deals
Manufacturer discounts are expected to be similar to April (up $33 per unit) but have materially increased from a year ago. As a percentage of MSRP, incentive spending is currently at 5.3 percent, an increase of 1.7 percentage points from a year ago.
King noted a driver of higher incentive spending from a year ago is the increased availability of lease deals, and leasing is growing accordingly. Leasing is expected to account for 23.9 percent of retail sales, up 3.3 percentage points from 20.6% in May 2023.
“After rising consistently during the past few years, average monthly loan payments are stabilizing,” he said. “The average monthly finance payment this month is on pace to be $727, down $3 from May 2023. The average interest rate for new-vehicle loans is expected to be 7.1 percent, an increase of 17 basis points from a year ago.”