November new-vehicle sales surge expected in US

28 November 2024

The US can expect strong sales growth in November, but how are manufacturer discounts driving the market? J.D. Power discusses the developments in its latest monthly forecast.

A new-vehicle sales surge is expected in the US during November, according to the latest forecast from J.D Power. Retail and non-retail transactions are projected to reach 1,361,200 units, up 6.7% year on year when adjusted for selling days.

November 2024 has 26 selling days, one more than the same month a year ago. Comparing the same sales volume without adjusting for the number of selling days equates to an increase of 11%.

The seasonally-adjusted annualised rate (SAAR) for total new-vehicle sales is expected to reach 16.5 million units. This would be a 1.2 million unit improvement from November 2023.

New-vehicle retail sales are expected to reach 1,153,100 units, up 10.1% year on year when adjusting for selling days. Comparing the sales volume without adjusting for selling days translates to an increase of 14.5% from 2023.

Deeper discounts

‘November's results highlight strong sales performance, driven by rising inventory levels for certain brands and deeper discounts from both manufacturers and retailers,’ said Thomas King, president, data and analytics division at J.D. Power.

J.D. Power anticipates that consumers will spend nearly $50 billion (€47.5 billion) on new vehicles this month. This represents a 13.7% increase from one year ago, setting a new November record.

‘Retail inventory is projected to be 2.1 million units, a 5.4% increase from October 2024 and a 29.7% increase from November 2023. Rising inventory levels are leading to deeper discounts from both manufacturers and retailers. However, inventory availability remains uneven across brands and models, with some high-volume vehicles still facing shortages,’ he added.

Drop in prices

The average retail transaction price for new vehicles has fallen slightly from a year ago. This has been driven by higher manufacturer incentives and larger retailer discounts, offset by changes in the mix of vehicles being sold.

Transaction prices are trending towards $45,471, down $150 or 0.3% from November 2023. The combination of considerably higher retail sales and slightly lower transaction prices means that buyers are on track to spend nearly $49.8 billion on new vehicles this month. This is 13.7% higher than November 2023, making it the highest November on record.

‘Total retailer profit per unit, which includes vehicles gross plus finance and insurance income, is expected to be $2,276, down 21.2% from November 2023,’ explained King.

The decline in profits is primarily driven by rising inventory levels, with fewer vehicles selling above the manufacturer's suggested retail price (MSRP). So far in November, only 11.6% of new vehicles in the US have been sold above MSRP, which is down from 22% in November 2023.

Total aggregate retailer profit from new-vehicle sales is projected to hit $2.5 billion, down 10.1% from the same month last year.

Longer selling times

‘With increased inventory, fewer vehicles are being pre-sold by retailers, allowing more shoppers to purchase directly from dealer lots. J.D,’ King added.

J.D. Power forecasts that 29.4% of vehicles will sell within 10 days of arriving at the dealership, down from a peak of 58% in March 2022. The average time a new vehicle remains in the dealer's possession before sale is expected to be 52 days, up from the 34 days seen a year ago.

Manufacturer discounts are continuing to increase. The average incentive spend per vehicle is expected to grow 42.3% from November 2023 and is on track to reach $3,291. Expressed as a percentage of MSRP, incentive spending is currently at 6.5%, an increase of 1.8 percentage points (pp) from one year ago. Spending increased by $174 per unit from October 2024.

‘One of the drivers of higher incentive spending from a year ago is the increased availability of discounting of lease payments,’ King highlighted. ‘This month, leasing is expected to account for 23% of retail sales, up from 22% in November 2023.’

Leasing impact

Attractive offers are driving an increase in the lease mix. However, the industry continues to contend with the lingering impact of reduced leasing activity from three years ago. The number of leases set to expire this November is down 14% compared with October and 35.9% lower than in November 2023. With fewer leases maturing, there are fewer opportunities to drive sales.

Average monthly finance payments in November are on target to be $745, up $20 from November 2023. The average interest rate for new-vehicle loans is expected to be 6.45%, down 71 basis points (one basis point is equal to 0.01%) from one year ago. Increasing monthly payments is a result of a drop in trade-in equity, even though transaction prices and interest rates are falling.

So far in November, average used-vehicle retail prices are $28,621, down $294 or 1% from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners, now trending towards $8,043, which is down $540 from one year ago.

Healthy new-car market

‘As the year draws to a close, the positive trends observed in November are expected to persist. Gradual improvements in more affordable vehicle availability are likely to sustain the momentum of new-vehicle sales, while transaction prices and profitability are projected to moderate slightly,’ King commented.

‘Despite challenges such as stubbornly high interest rates and declining used-vehicle values, the overall health of the new-vehicle market remains strong. Although profit per unit is decreasing, higher sales volumes and enhanced leasing activity reflect resilient consumer demand.

‘These trends position the industry for a solid finish to the year while continuing to adapt to evolving market dynamics,’ he concluded.

The details

• The average new-vehicle retail transaction price in November is expected to reach $45,471, down $150 from November 2023. The high for any month, $47,329, was set in December 2022.
• Average incentive spending per unit in November is expected to reach $3,291, up $978 from November 2023. Spending as a percentage of the average MSRP is expected to increase to 6.5%, up 1.8pp from November 2023.
• Average incentive spending per unit on trucks and SUVs in November is expected to be $3,431, up $988 from one year ago. The average spending on cars is expected to be $2,645, up $881 from one year ago.
• Retail buyers are on pace to spend $49.8 billion on new vehicles, up $6 billion from November 2023.
• Trucks and SUVs are on pace to account for 81.5% of new-vehicle retail sales in November.
• Fleet sales are expected to total 208,108 units in November, down 8.6% year on year. Fleet volume is expected to account for 15.3% of total light-vehicle sales, down 2.6pp from one year ago.
• Average interest rates for new-vehicle loans are expected to be 6.45%, down 71 basis points from 12 months ago.

Understanding EV incentives imperative

‘Information plays a pivotal role in shaping electric vehicle (EV) shopper consideration, especially when it comes to incentives,’ said Elizabeth Krear, vice president, electric vehicle practice at J.D. Power. ‘There is a direct correlation between the understanding of EV incentives and the likelihood of new-vehicle shoppers willing to consider an EV.’

A notable 41% of new-vehicle shoppers say they do not have a good understanding of EV incentives. Only 5% of new-vehicle shoppers are ‘very likely’ to consider an EV when they have minimal understanding of EV subsidies. This rises significantly to 56% when they have a strong understanding.

Additionally, tax credits and incentives are among the leading reasons people purchase an EV. Among buyers of premium EVs, 64% say such incentives are a top reason for their purchase. Among the buyers of mass-market EVs, this number sits at 49%.

‘Federal incentives were always supposed to be temporary. How long “temporary” is, is the key point,’ Krear added. ‘If the incentives go away, it will negatively affect sales in the short term. The growth this year is from new products hitting the market at lower prices and lower trim mixes.

‘Bouncing back may depend on manufacturer incentives and new-model introductions that appeal to shoppers,’ she concluded.