According to a joint forecast from J.D. Power and GlobalData released March 21, total new-vehicle sales for March 2024 are projected to reach 1,525,700 units, a 12.1 percent increase from March 2023
The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 16.4 million units, up 1.6 million units from March 2023. And new-vehicle total sales for the first three months of 2024 are projected to reach 3,830,500 units, rising 4.5 percent from Q1 2023.
New-vehicle retail sales for March 2024 are expected to increase 10.7 percent when compared a year ago, reaching 1,225,000 units. Additionally, new-vehicle retail sales for Q1 2024 are projected at 3,066,500 units, up 4.5 percent increase from last year.
Dealer Woes
Thomas King, president of the data and analytics division at J.D. Power, offered that in conjunction with robust sales for the first quarter, elevated transaction prices mean that consumers are expected to spend more than $129 billion buying new vehicles, an all-time record for the time period.
But not all the news is good, especially for dealers.
“While the sales and expenditure performance are impressive, it is coming at the expense of reduced retailer and manufacturer profitability as inventories of unsold vehicles rise and competitive pressures intensify,” said King in a press statement announcing the projections.
Inventory Increases
Transaction prices are trending towards $44,186—down $1,648 or 3.6 percent—from March 2023, a historical decline for March, as attempts to clear inventory are affecting prices. Total retailer profit per unit is expected to be $2,487, down 31.9 percent from March 2023.
Retail inventory levels are expected to finish around 1.7 million units, a 4.2 percent increase from February 2024 and a 39.3 percent increase from March 2023. Fleet mix is projected at 19.7 percent, up one percentage point from March 2023 and 18.4 percent on a volume basis, as several manufacturers increase their focus on fleet sales as a mechanism to address excess inventory, according to J.D. Power officials.
Buyer’s Market
“The average new-vehicle retail transaction price is declining as manufacturer incentives rise, retailer profit margins fall and availability of lower-priced vehicles increases,” King said. “Despite that, higher sales volumes mean consumers are on track to spend nearly $51 billion on new vehicles this month—the highest ever for the month of March and 6.5 percent higher than March 2023.”
As noted earlier, rising inventory is the primary factor behind the profit decline and fewer vehicles are selling above the manufacturer’s suggested retail price (MSRP). Thus far in March, only 15.7 percent of new vehicles have been sold above MSRP, down from 31 percent a year earlier.
J.D. Power projects that 31.7 percent of vehicles will sell within 10 days of arriving at the dealership, down from a peak of 58 percent in March 2022.
“Rising inventory means fewer vehicles are being pre-sold by retailers, with more shoppers able to buy directly off dealer lots,” said King. “The average time a new vehicle remains in the dealer’s possession before sale is expected to be 45 days, marking a 15-day increase from a year ago.”
Discounts Rising
Additionally, manufacturer discounts are expected to rise $170 from February and have materially increased from a year ago. The average incentive spend per vehicle has grown 66.6 percent from March 2023 and on track to reach $2,800; as a percentage of MSRP, incentive spending is currently at 5.8 percent, an increase of 2.2 percentage points from a year ago.
“One of the drivers of higher incentive spending is the increased availability of lease deals, and leasing is growing accordingly,” said King. Leasing is forecasted to account for 24.8 percent of retail sales, up 5.3 percentage points from 19.6 percent in March 2023.
After rising consistently, average monthly loan payments are stabilizing. On pace to be $722, the average interest rate for new-vehicle loans is expected to be 6.8 percent, an increase of 13 basis points from a year ago.
So far in March, average used-vehicle retail prices are $27,950, dropping 4.3 percent (or $1,248) from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners.
2024 Projections
King observed that with Q1 2024 almost complete, the industry is continuing along its trajectory back to pre-pandemic market dynamics.
“The bias is shifting from low sales volumes/high prices (and profits) to higher sales volumes/lower prices,” he stated. “However, rising inventories and rapidly intensifying competition for buyers mean that aggregate industry transaction prices and per unit profitability will likely deteriorate throughout the year.”
In the bigger picture, transaction prices and retailer profits remain well above pre-pandemic levels along with manufacturer discounts well below that will result in 2024 on track to being the fourth most profitable year on record for retailers, according to King.