Despite a modest increase in discounts, new cars and trucks are starting to accumulate on dealer lots, causing consumers to wait for larger discounts before making a purchase. Analysts believe that the high interest rates and prices are deterring buyers, leading to a stagnant market. Sales in May are expected to either show a small increase or remain flat compared to last year.
J.D. Power and GlobalData forecast May sales of about 1.4 million cars and trucks, representing a 2.9% increase from the previous year. While transaction prices have dropped slightly due to improved supply, the average monthly payment remains high due to high interest rates. The average monthly payment in May is estimated at $727, with a $3 decrease from last year, and the average transaction price is down by 2.3%.
Cox Automotive has also issued a similar forecast, predicting 1.4 million in sales for May. Despite an increase in inventory by 51% compared to last year, sales are expected to remain flat or show minimal growth. The average incentive per new vehicle is $2,640 in May 2024, a 48.1% increase from the previous year. Incentives as a percentage of the average Manufacturer’s Suggested Retail Price is estimated to be 5.3%, up from 3.6% the previous year.
With high interest rates and prices continuing to impact the market, consumers are cautiously waiting for better deals before investing in a new vehicle. The slight decline in transaction prices has not significantly affected the overall affordability of cars and trucks. As the industry navigates through these challenges, dealers are offering increased discounts to attract buyers and stimulate sales.
The current market conditions are highlighting the impact of high interest rates on consumers’ purchasing decisions. While dealers are increasing their incentives to drive sales, the overall growth in the market remains slow. Suppliers are working to improve supply chains and reduce costs to make vehicles more accessible to consumers.
As the automotive industry heads into the second half of 2024, analysts are closely monitoring market trends to determine the long-term impact of high interest rates and prices on consumer buying behavior. With inventory levels on the rise, dealers are expected to offer more incentives to entice buyers, potentially leading to an uptick in sales in the coming months.
