New Car/Vehicle Sales & Deals Slowing

Data coming from Emdunds and Cox Automotive suggest that there a fewer new car deals while sales are declining.

Shoppers seeking Labor Day deals on new cars will likely need to do some extra research before heading to the dealership this holiday weekend. According to the car shopping experts at Edmunds, the average advertised discount for 2019 model year vehicles hit 6.4% this July and isn’t expected to climb much higher in August or September. Edmunds analysts say that automakers are pulling back on major advertising and incentives for the holiday weekend because they’ve grown more comfortable with letting vehicles linger on dealership lots through the end of the year. In December 2014, just 24% of new vehicles sold were 2014 model year, whereas in December 2018, 2018 model year inventory made up 44% of sales.

Cox Automotive is forecasting U.S. new-vehicle sales volume in August to finish at 1.59 million, up 6.5% from last year, or an increase of nearly 100,000 units. The seasonally adjusted annual rate (SAAR), however, is expected to drop to 16.5 million, below July’s 16.8 million level, and down from August 2018’s strong pace of 16.9 million.

Charlie Chesbrough, senior economist with Cox Automotive, suggests a trend may be emerging: “Unfortunately, the third time is not a charm here. Compared to May 2019, which had the highest SAAR this year, August is forecast to be the third month in a row with a slowing sales pace. The market may finally be succumbing to toughening buying conditions and satiated vehicle demand.”

Although the pace is likely to decline, sales volume in August is forecast to be higher than last year. August 2019 has 28 selling days, one more than last August, which causes the SAAR to fall even though sales volume rises. In addition, Labor Day weekend, an important selling period, falls within the August reporting period this year and not September as it did last year. With the shift, comparing annual differences will be difficult. A better comparison will be combined August and September sales this year versus last year, eliminating the Labor Day weekend issue.

Record volume for August occurred in 2002 when sales reached 1.7 million vehicles and a SAAR of 18.1 million. It is unlikely that record is broken this month, however, another record could be achieved. The sales pace for cars fell to 4.6 million last month, the slowest pace since the depths of the great recession. In fact, of the 10 slowest months for passenger car sales over the last 43 years, six have occurred in 2019 – the other four were all during the 2009 downturn. The shift to crossovers from passenger cars in recent years has been dramatic and is likely the new normal.

Affordability issues are weighing on the new-car market as rising vehicle prices and elevated interest rates keep monthly payments out of reach for many potential buyers. “One of the key questions for the vehicle market today is whether all the recession talk in recent weeks has scared off potential buyers,” notes Chesbrough. “If one is expecting the economy to worsen, taking on a $500 monthly payment in the family budget, and committing to it for years, becomes much less desirable.”

The car shopping experts at Edmunds forecast that 1,599,264 new cars and trucks will be sold in the U.S. in August for an estimated seasonally adjusted annual rate (SAAR) of 16.6 million. This reflects a 14.3% increase in sales from July 2019, and a 7% increase from August 2018.

“New vehicle sales in August look a little healthier than usual thanks to Labor Day weekend falling earlier this year,” said Jeremy Acevedo, Edmunds’ senior manager of insights. “Market conditions are looking slightly more favorable than earlier this year thanks to a minor dip in interest rates, but we don’t expect that to cause a major turnaround. August really just stole sales that are normally attributed to September.”

Edmunds estimates that retail SAAR will come in at 14.4 million vehicles in August 2019, with fleet transactions accounting for 13.1% of total sales. An estimated 3.4 million used vehicles will be sold in August 2019, for a SAAR of 39.8 million (compared to 3.4 million—or a SAAR of 39.6 million—in July).