New vehicle sales are predicted to rise in February, thanks to a combination of lower prices and better availability.
A joint forecast from J.D. Power and GlobalData sees new vehicle sales rising 1.4% year-over-year to 1.21 million units, excluding the extra sales day February receives in 2024. Including that day brings the annual increase to 5.6%. Dealers are projected to sell 981,000 units by the end of the month, accounting for roughly 81% of all auto transactions. The retail sales volume represents a 3.8% increase from the same point in 2023.
The two companies attribute these improvements to several factors that have made the car market more favorable for buyers. One of these is the increase of manufacturer incentives, which J.D. Power President of data and analytics Thomas King notes have risen 75.3% year-over-year and are on track to hit $2,565 per unit, buoying vehicle sales in the process. “One of the drivers of higher incentive spending is the increased availability of lease deals, and leasing is growing accordingly,” King adds. “This month, leasing is expected to account for 23.2% of retail sales, up 4.5 percentage points from 18.7% in February 2023.”
Meanwhile, inventory levels had made a substantial recovery in the post-COVID-19 pandemic auto retail landscape, giving consumers more options and overcoming model shortages that have restricted vehicle sales and driven prices up for several years. Retail supply is on track to grow 3.6% month-over-month and 44.7% year-over-year by the end of February, with the share of fleet units declining 1.9%. As is typical, better availability in the car market has translated to weaker pricing. “Transaction prices in February are trending towards $44,045,” mentions King, who notes the amount represents a 4.2% drop from the prior-year period.
But while prices have fallen and the market has become more accommodating for buyers, dealers are rarely starved for profits. King predicts that buyers will spend $40.8 billion on new cars this month, a record-breaking number for this time of year and an increase of 4.1% from last February.
As 2024 progresses, vehicle sales volumes and prices are increasingly likely to resemble pre-pandemic norms, to the chagrin of veteran dealers who remember the challenges facing the retail automotive sector before 2020. However, as long as dealers can continue to improve the customer experience and operational efficiency, vehicle sales will continue to show strength.
