May Sales Increased Due to Silverado, Traverse, RAM, Ford Mustang, Expedition, Navigator & SUVs

May was great month for automotive sales, new vehicles sales increased 4.7% due to light trucks with a seasonally adjusted annual rate of 16.91 million. The increase is attributed to increased Jeep sales at FCA. General Motors doesn’t report monthly sales but researchers report increases. The average transaction of price of vehicle sale hovers between $33,149 and $35,635 depending upon what source. Hyundai and Nissan sales have decrease over last year.

ALG, the industry benchmark for determining the future resale value of a vehicle, projects U.S. revenue from new vehicle sales will reach $51 billion for the month of May, up 6.1 percent from a year ago.

ALG expects a gain of $2.9 billion in revenue for automakers versus 2017. Additionally, incentive spending is projected to increase 1.8 percent year over year and month over month.

“Plot lines are thickening as automakers deploy varying strategies in a strong and stable, but flat, sales environment for 2018,” said Eric Lyman, ALG’s chief industry analyst. “Nissan and Hyundai are maintaining sizeable year over year decreases in spending, right sizing their sales goals to drive long term brand health. Conversely, GM is expected to become the top spending automaker in the industry, surpassing the high dollar amounts seen by BMW and Daimler.”

ATP from ALG & Kelley

ALG estimates ATP for a new light vehicle was $33,149 in May, up 3.2 percent from a year ago. Average incentive spending per unit grew by $177 to $3,679. The ratio of incentive spending to ATP is expected to be 11.1 percent, up from 10.9 percent from a year ago.

The analysts at Kelley Blue Book today reported the estimated average transaction price for light vehicles in the United States was $35,635 in May 2018. New-vehicle prices increased by $1,187 (up 3.4 percent) from May 2017, while falling $145 (down 0.4 percent) from last month.

“Average transaction prices rose a healthy 3 percent this month and remain strong even as new-vehicle demand is expected to falter in 2018,” said Tim Fleming, analyst for Kelley Blue Book. “It’s no surprise prices were helped by SUV demand, but pickup trucks played a big role in May’s increases as well. Prices in both full-size and mid-size truck segments were up 4 percent, and it is shaping up to be a pivotal time for pickups with the new RAM truck now on the market, a new Chevrolet Silverado coming later in the year, and the Ford Ranger returning to the U.S. early next year.”

Ford Motor Company is among the automakers benefiting from strong utility and pickup truck lineups. Ford Motor Company average transaction prices grew nearly 5 percent in May 2018, as both brands put up solid numbers. Lincoln’s average transaction prices are up 14 percent, due to the new Navigator, which jumped 32 percent from this time last year. For the Ford brand, the new Expedition increased 15 percent, while the 460-horsepower Mustang GT helped the model’s average improve by 12 percent. A strong mix of F-Series sales also helped Ford, as the brand climbed 4 percent.


General Motors also was up 4 percent year-over-year, with the Chevrolet brand rising the most at 5 percent. Chevrolet’s increase came on a strong mix of Silverado sales, as well as the redesigned Traverse, which posted a 12 percent gain. In addition, the new Buick Enclave was up 7 percent, although an expectedly high sales mix of Encore will result in a slight decline in average transaction prices for Buick.

Auto loan interest rates are expected to hit record highs not seen since 2009 in May, according to the car shopping experts at Edmunds. The annual percentage rate (APR) on new financed vehicles averaged 5.75 percent in May, compared to 5.04 percent in May 2017 and 4.17 percent in May 2013.

While it may seem counterintuitive, analysts say this spike in auto loan interest rates is having a positive influence on the automotive market — at least for now.

“Higher interest rates appear to be incentivizing car shoppers, which is likely why we’ve seen stronger than expected sales so far this year,” said Jeremy Acevedo, Edmunds’ manager of industry analysis. “Since interest rates have been creeping up all year, shoppers are likely thinking it’s better to buy now before rates get any higher. However, this is likely a temporary pull-ahead effect, and could come back to bite automakers later in the year.” experts point to a significant reduction in zero-percent loans as a contributor to the rise in average APRs. In May, zero-percent financing deals reached their lowest levels in seven years, constituting 6.3 percent of total finance deals, compared to 9.9 percent in May 2017 and 9.8 percent in May 2013.

“Zero-percent financing loans are growing too costly for automakers to offer, but that doesn’t meant that incentives are not out there,” said Acevedo. “Automakers and dealers are simply turning toward other, more creative incentive structures in order to lure in consumers.”