The run on strong new vehicle sales should continue in March, according to a forecast from J.D. Power and GlobalData. New vehicle sales are expected to jump 12.1% for March and 4.5% for the first quarter.
Rising inventory levels gave buyers more options at lower prices last year.
Overall sales are expected to be strong, retail sales numbers lag the total number, but are still a robust 10.7% higher than the year-ago results. The seasonally adjusted annualized rate, or SAAR, for new vehicle sales is forecast at 16.4 million units, a 1.6 jump from last March.
“March is poised to witness a robust increase in total vehicle sales, which are expected to increase 12.1% from March 2023. Additionally, new-vehicle sales for the first quarter are projected to increase 4.5% from Q1 2023 when adjusted for selling days,” said Thomas King, president of the data and analytics division at J.D. Power.
“In conjunction with robust sales for Q1, elevated transaction prices mean that consumers are expected to spend more than $129 billion buying new vehicles, an all-time Q1 record. However, while the sales and expenditure performance are impressive, it is coming at the expense of reduced retailer and manufacturer profitability as inventories of unsold vehicles rise and competitive pressures intensify.”
Inventory and incentives
Automakers continue to ensure that buyers have plenty of choices to select from. Retail inventory is expected to settle in around 1.7 million units in March, which is a 4.2% increase compared to the previous month and a massive 39.3% rise from March 2023.
On the upside, the average price of a new vehicle dropped significantly.
“The average new-vehicle retail transaction price is declining as manufacturer incentives rise, retailer profit margins fall, and availability of lower-priced vehicles increases. Transaction prices are trending towards $44,186 — down $1,648 or 3.6% — from March 2023, the largest decline in March ever,” King said.
“However, despite that, higher sales volumes mean consumers are on track to spend nearly $51 billion on new vehicles this month — the highest ever for the month of March and 6.5% higher than March 2023.
“Total retailer profit per unit — which includes vehicles gross plus finance and insurance income — is expected to be $2,487, down 31.9% from March 2023. Rising inventory is the primary factor behind the profit decline and fewer vehicles are selling above the manufacturer’s suggested retail price (MSRP). Thus far in March, only 15.7% of new vehicles have been sold above MSRP, which is down from 31% in March 2023.”
Dealer inventories are rising, helping dealers sell more vehicles — at lower prices.
What does it cost
The overall cost to buy a new vehicle continues to drop, falling to $44,186 in March. That’s a decline of $1,648 compared to a year ago. The previous high was $47,329 in December 2022.
Average incentive spending per unit in March is expected to reach $2,800, up from $1,680 in March 2023. Spending as a percentage of the average MSRP is expected to increase to 5.8%, up 2.2 percentage points from March 2023.
Meanwhile the average incentive spending per unit on trucks/SUVs in March is expected to be $2,964, up $1,219 from a year ago, while the average spending on cars is expected to be $2,180, up $750 from a year ago.
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