Pub. 18 2019-2020 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 2 , 2 0 1 9 22 new jersey auto retailer An Analysis of Second Quarter 2019 Auto Sales BY PATRICK MANZI Following is an analysis of U.S. auto sales and the economy following the end of the second quarter in 2019, recently issued by the National Automobile Dealers Association ( NADA ): What happened in June 2019? Manzi: June sales finished up at a SAAR of 17 million units, which represents roughly a 1-2 percent decrease from June of last year. This is the third month this year with a SAAR of 17 million units or more. Light trucks accounted for more than 70 percent of all new vehicles sold. What happened in the first two quarters of 2019? Manzi: Sales have declined relative to 2018 each month this year, but overall, not more than we expected. Transaction prices on both cars and light trucks continued to rise and set new records. According to the latest NADA Average Dealership Financial Profile Series from April 2019, the average new-vehicle trans- action price was $36,642, up 3.3 percent compared to this time last year. Transaction prices on used vehicles sold by franchised dealers have also risen. The average used-vehicle transaction price in April was $20,979, up 3.8 percent compared to this time last year. The average monthly payment gap between new and used vehicles continues to increase, which will likely result in more consumers shifting to the used market. Incentive spending fell in April but picked back up in May. Compared to last year, average incentive levels were lower each month this year except for May. According to J.D. Power, average incentive spending in May was $3,816 per vehicle, an increase of $12 compared to last year. If inventory levels get too high, we will see incentive spending pick up to help clear out dealer lots. What are some key trends for the rest of the year and potential headwinds and tailwinds? Manzi: We expect that off-lease vehicle returns will peak over the summer months and will total more than 4 million units this year. Off-lease inventories will remain robust over the next few years due to high leasing penetrations over the past few years. As prices continue to climb on the new vehicle side for both loans and leases, more and more consumers will shift to the used vehicle market. Low vehicle sales during the Great Recession have resulted in supply constraints of older and lower-priced vehicles, which will cause prices at the lower end of the spectrum to remain elevated in the near term. 2019