US new-vehicle sales set to increase in October as transaction prices fall

24 October 2024

While new-vehicle sales are expected to grow in the US during October, transaction prices will be down year on year. J.D. Power calculates the impact of incentives, discounting and lower-priced vehicle availability in its latest market forecast.

Total new-vehicle sales in the US, including retail and non-retail transactions, are projected to reach 1,327,591 in October. This will be up 2.1% compared with the same month last year, when adjusting for selling days.

October 2024 has 27 selling days, two more than October 2023. Comparing the same sales volume without this adjustment translates to an increase of 10.3% compared with 13 months ago.

The seasonally-adjusted annualised rate (SAAR) for total new-vehicle sales is expected to be 16.1 million units, up by 0.6 million units year on year.

Retail sales of new vehicles are expected to reach 1,136,718, up 5.9% from October 2023 when adjusting for selling days. Comparing the same sales volume without this adjustment translates to an increase of 14.3%.

Solid sales performance

‘October results show a solid sales performance, with retail sales growing nearly 6% year on year and a projected total SAAR of 16.1 million,’ said Thomas King, president of the data and analytics division at J.D. Power.

‘While transaction prices and interest rates continue to decline, monthly payments are up slightly, largely due to reduced trade-in equity driven by falling used-vehicle prices. Despite this, consumers are expected to spend approximately $48.3 billion (€44.7 billion) on new vehicles this month.’ This equates to an increase of 11.8% compared with October 2023.

‘Retail inventory is projected to be 1.9 million units, a 4% increase from September and a 25.1% increase from October 2023. Increasing inventory levels are driving deeper discounts from both manufacturers and retailers. However, the availability of inventory remains uneven across different brands and models, with certain high-volume vehicles still experiencing shortages,’ King added.

Transaction prices falling

The average new-vehicle retail transaction price has fallen from a year ago due to higher manufacturer incentives, larger retailer discounts and increased availability of lower-priced vehicles.

Transaction prices are trending towards $44,904, down $739 or 1.6% from October 2023. Higher retail sales and lower transaction prices means buyers are on track to spend nearly $48.3 billion on new vehicles. This will equate to an increase of 11.8% year on year.

‘Total retailer profit per unit, which includes vehicles gross plus finance and insurance income, is expected to be $2,245, down 27.3% from October 2023,’ King added.

Rising inventory is the primary factor behind the profit decline. Accordingly, fewer vehicles are selling above the manufacturer's suggested retail price (MSRP). So far, only 12.7% of new vehicles have been sold above MSRP, which is down from 27.1% in October 2023.

Total aggregate retailer profit from new-vehicle sales for October is projected to be $2.4 billion. This equates to a drop of 17.4% against the same month last year.

Fewer pre-sales for retailers

‘Increased inventory means fewer vehicles are being pre-sold by retailers, with more shoppers able to buy directly off dealer lots,’ King confirmed.

‘J.D. Power forecasts that 29.7% 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 50 days, up from 20 days a year ago.’

Manufacturer discounts are continuing to rise. The average incentive spend per vehicle is expected to grow 70.5% from October 2023 and is on track to reach $3,149. Expressed as a percentage of MSRP, incentive spending is currently at 6.3%, up 2.5 percentage points (pp) from a year ago. Spending increased by $24 per unit from September 2024.

Importance of discounted lease payments

‘One of the drivers of higher incentive spending from a year ago is the increased availability of discounted lease payments. This month, leasing is expected to account for 23.2% of retail sales, up 2.3pp from 20.8% in October 2023.

‘Although appealing lease offers are boosting the lease mix, the industry is still grappling with the lasting effect of diminished leasing activity from three years ago. The number of leases set to expire this October is down 10.7% compared with September and 35.4% lower than in October 2023. With fewer leases maturing, there are less opportunities to drive sales,’ King highlighted.

Average monthly finance payments in October are on pace to be $738, up $14 from the same period in 2023. The average interest rate for new-vehicle loans is expected to be 6.7%, down 68 basis points (one basis point is equal to 0.01%) from a year ago. Monthly payments increasing is a result of a drop in trade-in equity, even though transaction prices and interest rates are falling.’

So far in October, average used-vehicle retail prices are $28,472, down 2.3% from a year ago, shrinking $699. The decline in used-vehicle values is translating to lower trade-in equity for owners, now trending towards $7,909, which is down $911 from a year ago.

‘November traditionally marks the beginning of the holiday sales event season for the automotive industry. This period often sees a focus on premium vehicles, accompanied by manufacturer-backed lease incentives and pricing discounts. As the number of leases expiring in November and December is projected to be nearly 40% lower than the same period a year ago, this holiday season may require innovative strategies to entice customers into acquiring a new vehicle,’ King said.

The details

• The average new-vehicle retail transaction price in October is expected to reach $44,904, down $739 from October 2023. The current record high for a month was set in December 2022 at $47,329.
• Average incentive spending per unit in October is expected to reach $3,149, up $1,302 from October 2023. Spending as a percentage of the average MSRP is expected to increase to 6.3%, up 2.5pp year on year.
• Average incentive spending per unit on trucks/SUVs in September is expected to be $3,338, up $1,385 from a year ago, while the average spending on cars is expected to be $2,309, up $901 compared to the same month last year.
• Retail buyers are on pace to spend $48.3 billion on new vehicles, up $5.1 billion from October 2023.
• Trucks/SUVs are on pace to account for 78.3% of new-vehicle retail sales in October.
• Fleet sales are expected to total 190,872 units in October, down 15.6% from October 2023. Fleet volume is expected to account for 14.4% of total light-vehicle sales, down 3pp from a year ago.
• Average interest rates for new-vehicle loans are expected to be 6.7%, down 68 basis points from a year ago.

New model year effect

‘The electric vehicle (EV) share of the retail market increased 0.8pp in September, rising to 10.2%,’ said Elizabeth Krear, vice president, electric vehicle practice at J.D. Power. ‘The fourth quarter is when the industry will see the effect of new model year 2025 vehicles entering the market.’

‘EV model year transition is behind petrol-powered models, as only 5% of EVs have transitioned to model year 2025 versus 37% for petrol-powered models. A later model-year transition typically brings more incentives to clear out the older model year. This means OEMs risk having to spend more money to move the older inventory,’ she added.

‘EV Incentives as a percentage of MSRP are currently averaging 11.5%, up from 4.7% this time a year ago. In comparison, similar incentives for petrol-powered vehicles are averaging almost 6%, up from 3.8% a year ago. Right now, 83% of EV inventory is from model year 2024 and 42% of petrol-powered inventory is from model year 2024.

‘While typical changeover, incentives and inventory would imply the continued pricing actions to move older vehicles, the result of the upcoming election might also influence policy changes, consumer confidence and consideration of EVs,’ Krear concluded.