A reduced inventory of new cars keeps prices and profitability up

According to a new forecast from J.D. Power and LMC Automotive, new vehicle retail sales for August are expected to decline from August 2021. Combined with record new vehicle prices and retailers struggling to maintain sufficient inventory to meet consumer demand, forecasts suggest a slowdown in the pace of sales. However, despite rising interest rates, transaction prices and profits continue to rise.

Retail sales for this month are expected to reach 980,400 units, down 2.6% after adjusting for sale days. August 2022 had an additional selling day compared to the same month last year.

Total new vehicle sales, including retail and non-retail transactions, are expected to reach 1,136,800 units. This is an increase of 0.6% from August 2021. The seasonally adjusted annual rate (SAR) for total new vehicle sales is expected to be 13.3 million units, up 0.2 million units compared to 2021.

Thomas King, president of data and analytics at JD Power, said August is typically a month of high-volume sales as manufacturers launch marketing moves to weed out the latest vehicles from the model year. “This August, the industry is still constrained by insufficient inventory to meet strong consumer demand,” he said.

“August is on track to be the 10th consecutive month where retail inventories close below 900,000 units,” King added. He mentioned that a significant portion of vehicles are sold before they reach dealerships.

New vehicle prices continue to set records, with the average transaction price expected to reach $46,259. This number represents an increase of 11.5% from a year ago and would be the highest on record. So, despite the slowing pace of sales, shoppers continue to spend at an incredible rate.

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