In today’s episode of Inside Automotive, Tyson Jominy, the Vice President of Data and Analytics at J.D. Power, reflects on December sales results and discusses what lies ahead for 2025.
According to Jominy, the estimated seasonally adjusted annual rate (SAAR) for December 2024 is 17.2 million units, marking significant growth and a positive note to end the year. However, despite the increase, total sales of new vehicles in 2024 are projected to land between 15.8 and 15.9 million units.
Jominy also speculates that the abnormal December results may have been caused by consumers finally hopping off the fence after the conclusion of the presidential election. An additional contributing factor may be consumers replacing damaged or totaled vehicles after the recent hurricanes that swept throughout the southeast of the U.S.
However, the uptick in purchases can primarily be attributed to recent interest rate cuts by the Federal Reserve in mid-December.
Things are trending in the right direction, resulting in increasing consumer confidence. Despite F&I managers nationwide stating that the rate cuts haven’t drastically dropped financing rates, consumers’ perception still drives them into the showrooms.
Affordability in the market continues to be a hot topic. Average transaction prices (ATP) have fallen for the past 18 months and are now down to a rough average of $45,000. However, consumers are still feeling the pressure as their monthly payments rise to an all-time high average of $740.
The affordability crisis is a multi-faceted issue that offsets the discounts and incentives offered by manufacturers and dealers. The average MSRP for new vehicles is rapidly rising as automakers roll out more expensive models. In addition, consumers receive less for their trade-in values, giving them smaller equity and causing them to finance a more significant sum.
The affordability crisis will likely continue into 2025 and remain a hot topic in the industry. The incoming Trump administration will likely slash the federal EV tax credit and impose stiff tariffs on Canada, Mexico, and China, putting additional strain on the market.
Despite the mounting challenges, dealers should expect another great year. The J.D. Power team tentatively projects that in 2025, the U.S. auto industry will sell 16.2 million vehicles, a growth of roughly 300,000 to 400,000 units.
The key to success is to prepare a strategy. Jominy advises dealers to remain focused on quickly clearing out bloated inventory levels. Dealers should expect gross profit to fall to pre-pandemic levels. To combat this, dealers should focus on accelerating performance in their F&I, used vehicles, and leasing departments.
"Dealers are doing very well with volume and it continues to be a game where inventory is rising. So when you start to see inventory rising as a dealer, be as quick as you can to get rid of it because we do see that a lot of manufacturers continue to produce and sometimes more than they need." – Tyson Jominy
