U.S. auto sales were predicted to fall this year, and due to bad weather, lower-than-expected tax refunds and some mixed economic inputs, March auto sales are expected to help ensure that prophesy comes true.
New vehicle sales will drop 2.1% this month compared with year-ago results, according to industry consultants J.D. Power and LMC Automotive. The pair are forecasting total U.S. vehicle sales of about 1.56 million units in March.
Retail sales are expected to hit 1,195,000 units, which is a 3.4% decline. First quarter sales this year will be at their lowest levels since 2013 at about 2.94 million vehicles, and a drop of 4.9% compared with the same period a year ago.
“This is the first time in six years that Q1 sales will fall short of 3 million units. While the volume story could be better, there is remarkable growth in transaction prices, with records being set monthly,” Thomas King, senior vice-president of the data and analytics division at J.D. Power, said.
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Although automakers are selling fewer new vehicles this year, they’re making more on each sale. The average transaction price for new vehicles is tracking to hit $33,319, which would be the highest ever for the first quarter. It would also be more than $1,000 higher than compared to the same period a year ago.
LMC Automotive also forecast total light-vehicle sales of 16.9 million units this year, a 2.2% fall from 2018. Light-vehicle sales last year came in at about 17.3 million vehicles. Although new vehicle sales are down overall, the used car market is booming.
The used vehicle market, according to Edmunds.com, is expected to hit a record of more than 41 million units in 2019, after setting a new record last year of 40.2 million. What’s driving trend? Increased prices on new cars is making them less appealing, the interest rate hikes – nearly 17% year-over-year are pushing folks out of the new car market.
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On top of all that, according to Edmunds.com analysts, the industry is expecting a record number of lease returns this year will give shoppers more options than ever in the used market.
“Typically sales of new and used vehicles follow the same pattern — if sales of new vehicles rise or fall, so do sales of used vehicles, and vice versa,” said Ivan Drury, Edmunds’ senior manager of industry analysis.
“But now we’re seeing new vehicle sales fall while used rise, indicating the market has reached a flash point. New cars are getting so expensive that they’re out of reach for many car shoppers, but there are so many more affordable used vehicles coming off lease that the market is naturally shifting in that direction.”
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Edmunds data shows that in 2013, the price gap between new and 3-year-old used vehicles was 56%, amounting to more than $11,000 in savings on average. In 2018, that number grew to 62%, totaling nearly $14,000 in savings on average.