Last Thursday, JD Power and LMC Automotive released their projections for August 2021. Their joint assessment showed that sales are likely to see a significant drop from August 2020 and even more so from August 2019. Specifically, when adjusting statistics to even outselling days, new vehicle sales are projected to drop 14.3% from August 2020 and 21.6% from August 2019. Overall, JD Power and LMC Auto expect total sales to be 987,100.
When asked about the low sales projections, JD Power executive Thomas King stated that while August is usually a “peak selling month,” this year will be different because “the industry has insufficient inventory at dealerships to meet strong consumer demand.” He added that “the consequence is that the retail sales pace is depressed, but transaction prices are elevated.”
Low inventory has continued to plague the auto market, with Cox Automotive reporting in mid-July that new inventory (including non-luxury and luxury brands) was only 1.34 million, which is a sharp decrease from April when inventory stood at 2.17 million. Days’ supply dipped to 29, which was 60% lower than it was last summer.
The recently released forecast also notes that vehicles are still being sold quickly once they arrive on the lot. Almost half of all vehicles delivered in August are expected to have sold within 10 days of arrival, and on average, the number of days from delivery to sale is a record 26 days. The report indicates this is a large increase from 2019 when just 26% of new vehicles were sold within ten days of delivery.
Prices are also expected to continue rising, with the joint assessment indicating the average transaction price for a new car in August 2021 will be $41,378. This is even higher than July 2021, which was the first time the average transaction price ever reached over $41,000. The report noted that the increases are partially due to the widespread decrease in manufacturer incentives, which is expected to drop to $1,823 for the month. This is the lowest number on record and is more than 5% below last year.
Tyson Jominy, J.D. Power Vice President of Data & Analytics, added that supply chain issues are also contributing to the rise in prices, but despite the ongoing increases, consumers are still expected to shell out a total of $40.8 billion on new cars in August. This is reportedly lower than August 2020 and much lower than August 2019 but still shows consumers are looking for new vehicles and are willing to pay.
Thursday’s report also detailed the attractive trade-in values, which are an average of 70% higher than last year, as well as decent interest rates, which were projected to be at 4.31%. These two factors are expected to boost the average monthly payments of car owners who have financed their vehicles, as the report states the average payment will be $638, which is 10% higher than August of 2020.
Of course, manufacturers need to continue trying to churn out as many new vehicles as they can despite shortages and supply chain disruptions, as one piece of solving the current market’s issues is increasing inventory and giving consumers more options. Ultimately, though, what Thursday’s report also projects is that despite rising costs and short supply, consumers have not completely shunned dealerships and many consumers are willing to purchase new vehicles at a higher price even if dealers don’t have the specific vehicles buyers are looking for.
Did you enjoy this article from Kimberly Hurley? Please share your thoughts, comments, or questions regarding this topic by submitting a letter to the editor here, or connect with us at email@example.com.