Auto Service World
News   August 18, 2022   by Adam Malik

U.S. car sales tumble in July but not dealer profits

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New car sales numbers in the U.S. dropped dramatically last month compared with last year. But dealer profits aren’t hurting as high prices are boosting bottom lines.

A joint forecast from J.D. Power and LMC Automotive predicted retail sales of new vehicles last month were expected to reach 988,400 units. That’s nearly an 11 per cent decrease from July 2021 when adjusted for selling days. This year’s July had one fewer selling day compared to last July — when not adjusted, sales volume decreased 14.1 per cent from 2021.

“The industry sales pace is simply a function of the number of vehicles being delivered to dealers each month, with a large portion of those vehicles being sold before they arrive at the dealership,” explained Thomas King, president of the data and analytics division at J.D. Power. “This month, 55 per cent of vehicles will be sold within 10 days of arriving at a dealership, while the average number of days a new vehicle is in a dealer’s possession before being sold is on pace to be 19 days — down from 29 days a year ago.”

Prices meanwhile, are remaining at record highs. The average transaction price is expected to reach US$45,869, a 12.3 per cent increase from a year ago. That’s the second highest on record.

“July is yet another month where supply constraints keep vehicle sales artificially low but deliver record transaction prices and dealer profitability,” King said.

With a lack of inventory, deals and discounts aren’t being offered by automakers and dealerships. King reported that the average incentive spend per vehicle is coming in at less than $900, which is a decrease of about 55 per cent from a year ago.

“This will mark the third consecutive month under $1,000 and the first time under $900,” he said. “One of the factors contributing to the reduction in incentive sending is the absence of discounts on vehicles that are leased. This month, leasing will account for just 17 per cent of retail sales. In July 2019, leases accounted for 29 per cent of all new-vehicle retail sales.”

What does the month ahead look like?

“In August, the overall industry sales pace will continue to be constrained by procurement, production and distribution challenges,” King said. “Consumer demand remains markedly higher than supply, all of which points to a continuation of the current marketplace dynamics of depressed sales volumes but record pricing and profitability.”

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