How will the US new-vehicle market finish 2024?

19 December 2024

New-vehicle sales are forecast to end 2024 with a strong performance, but are all market indicators sharing this positivity? J.D. Power’s latest forecast sets out what to expect from the US market by the end of this year.

Total new-vehicle sales, including retail and non-retail transactions, are projected to reach 1,520,000 this month in the US. This equates to a year-on-year increase of 7.3% when adjusted for selling days. This month has 25 selling days, one fewer than December 2023. Comparing the same sales volume without adapting for selling days translates to an increase of 3.1%.

The seasonally-adjusted annualised rate (SAAR) is expected to reach 17.2 million units, up 1.1 million units from December 2023. When adjusted for selling days, deliveries in the fourth quarter are projected to reach 4.2 million units, up 5.9% year on year. Registrations are projected to reach 15,965,300 units, a 2% increase from 2023 when adjusted for selling days.

Retail sales of new vehicles are expected to reach 1,297,400 units, an 11.9% year-on-year increase when adjusted for selling days. Comparing the same volume without considering the number of selling days translates to an increase of 7.6% from 2023.

New-vehicle retail sales in the fourth quarter are projected to reach 3,580,300 units. When adjusted for selling days, this would equate to an increase of 8.8% compared to the same time last year. New-vehicle retail sales for 2024 are projected to reach 13,162,900 units, a year-on-year increase of 3.3% when adjusted for selling days.

Consumer expenditure to hit high

‘December results will cap off the year with a strong performance, highlighted not only by robust year-over-year sales growth, but also by the fact that consumer expenditures on new vehicles will reach the highest level for any month on record,’ said Thomas King, president of the data and analytics division at J.D. Power.

Retail sales for December are on track to reach 1.3 million units, reflecting an 11.9% increase compared with December 2023. Consumer expenditures on new vehicles are projected to hit $56.4 billion (€54.2 billion), the highest monthly level ever recorded.

This strong finish also means consumer expenditures on new vehicles will set an annual record of $586 billion. This marks the fourth consecutive year consumers have spent more than half a trillion dollars on new-vehicle purchases.

Retail inventory is projected to hit two million units, a 1.3% decrease from November and a 24.7% increase from December 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.

The average retail transaction price for new vehicles is up marginally from a year ago. It is trending toward $46,258, up $52 or 0.1% from December 2023. The combination of considerably higher retail sales and slightly higher transaction prices means buyers are on track to spend nearly $56.4 billion on new vehicles this month. This is 8.1% higher than December 2023 and the highest of any month on record.

Profits declining

Total retailer profit per unit, including vehicles gross alongside income from finance and insurance, is expected to reach $2,107. This would be down 19.7% from December 2023.

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 December, only 11.8% of new vehicles have been sold above MSRP, which is down from 19.7% in December 2023.

Total aggregate retailer profit from new-vehicle sales is projected to hit $2.6 billion, down 13.3% from December 2023. ‘With increased inventory, fewer vehicles are being pre-sold by retailers, allowing more shoppers to purchase directly from dealer lots,’ King added.

‘J.D. Power forecasts that 28.2% 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 55 days, up from 38 days a year ago,’ he explained.

Manufacturer discounts are continuing to increase. The average incentive spend per vehicle is expected to grow 30.7% from December 2023 and is on track to reach $3,442. Expressed as a percentage of MSRP, incentive spending is currently at 6.6%. This would mark an increase of 1.4 percentage points (pp) from a year ago. Spending increased by $98 per unit from November 2024.

Fewer sales opportunities

‘One of the drivers of higher incentive spending from a year ago is the increased availability of discounting of lease payments. This month, leasing is expected to account for 22.7% of retail sales, up from 22.3% in December 2023,’ King highlighted.

‘While attractive lease offers are driving an increase in the lease mix, the industry continues to contend with the lingering effect of reduced leasing activity from three years ago. The number of leases set to expire this month is down 10.5% from November and 41.3% lower than a year ago. With fewer leases maturing, there are fewer opportunities to drive sales.’

Average monthly finance payments this month are on pace to reach $753, up $21 from December 2023. The average interest rate for new-vehicle loans is expected to be 6.09%. This is down 62 basis points from a year ago (one basis point is equal to 0.01%).

So far in December, average used-vehicle retail prices are $28,631, down $505 or 1.7% from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners. This is trending toward $8,189, down $242 from a year ago.

‘Despite challenges like high interest rates and declining trade-in values, the new-vehicle market remains strong. While per-unit profits are declining, resilient consumer demand, assisted by increased inventory and leasing activity, has supported a solid year-end performance,’ he commented.

As the positive trends of 2024 continue into 2025, improved overall inventory and greater availability of affordable vehicles are expected to sustain sales momentum. Transaction prices and profitability for OEMs and retailers are likely to moderate slightly. However, this trade-off between higher sales volumes and lower margins will ensure total profitability remains strong compared to historical levels.

The details

• The average new-vehicle retail transaction price in December is expected to reach $46,258, up $52 from December 2023. The record for any month, $47,329, was set in December 2022.
• Average incentive spending per unit in December is expected to reach $3,442, up $809 from December 2023. Spending as a percentage of the average MSRP is expected to increase to 6.6%, up 1.4pp from December 2023.
• Average incentive spending per unit on trucks and SUVs in December is expected to be $3,576, up $806 from a year ago. Meanwhile, the average spending on cars is expected to be $2,771, up $750 from a year ago.
• Retail buyers are on pace to spend $56.4 billion on new vehicles, up $4.2 billion from December 2023.
• Trucks and SUVs are on pace to account for 82.4% of new-vehicle retail sales in December.
• Fleet sales are expected to total 222,616 units in December, down 13.8% from December 2023. Fleet volume is expected to account for 14.6% of total light-vehicle sales, down 3.6pp from a year ago.
• Average interest rates for new-vehicle loans are expected to be 6.09%, down 62 basis points from a year ago.

EV interest falls

‘The percentage of new-vehicle shoppers who say they are interested in purchasing an electric vehicle (EV) for their next vehicle is 25%, which is down 2pp from a year ago. However, adoption increased 1pp this year as the retail share of EVs reaches 9%,’ explained Elizabeth Krear, vice president of the electric vehicle practice at J.D. Power.

New products and attractive pricing drove the growth. Specifically, offerings from GM, Honda, Hyundai and Kia in the popular compact and midsize SUV segments were influential. There were also aggressive pricing strategies from Ford and Cadillac. Conversely, Tesla’s share of EV sales dipped this year, so all eyes will be on Tesla in 2025 to see how the company attempts to counter that decline.

‘The industry is poised to experience significant changes related to EV incentives and regulations. We anticipate the rate of EV adoption to decelerate. Even though shoppers will have more EV choices than ever to equivalent gas-powered models, now at 63% from 39% a year ago, a significant majority of EV buyers were influenced by incentives,’ Krear noted.

‘A notable 87% of all EVs sold this year received an average federal incentive of $5,600. If the incentive is removed, this will put additional pressure on EV adoption, as purchase price and infrastructure remain the top two barriers to adoption,’ Krear added.

This year, EV sales growth increased at a pace twice that of infrastructure growth. Meanwhile, satisfaction in public charging reached a three-year low in the third quarter of 2024. A slowing in EV adoption next year may give the ecosystem a chance to catch up with infrastructure. The transition from gas-powered vehicles to EVs has complex interdependent factors. As one factor changes, it has a ripple effect on other elements.

‘In 2025, we expect to see ongoing contraction and expansion of the factors that make up the EV ecosystem. Monitoring the players who try to work in tandem to develop that ecosystem, and how consumers react to it, is an imperative element,’ Krear concluded.