Fleet sales are bolstering increases in light new vehicle sales, finds Cox Automotive’s Market Report for Feb. 6.
The light new-vehicle sales pace increased in January to 15.7 million, while new vehicle prices declined slightly, and incentives increased.
Normally automotive light vehicle sales see a 25-30% decline in January. The sales pace for January 2023 was 15.7 million, up from last year’s 15.1 million and 17.7% from December’s 13.4 million.
Most sales in January came from the fleet side. Combined sales into large rental, commercial, and government fleets rose 58% from January 2022. Sales into large rental fleets increased 96% year over year, while sales into commercial fleets were up 31%, and sales into government fleets were up 65%.
Total light vehicle sales rose 4.2% in January from 2022, with the same number of selling days.
The remaining retail sales were estimated to be up 0.3%, leading to an estimated retail seasonally adjusted annual rate (SAAR) of 13.2 million. This figure is down 0.2 million from 2022, but up 1.7 million from December. At 16.5%, the fleet market share is estimated to have gained 3.3% market share compared to January 2022’s share of 13.2%. This represents a 2.3% share gain compared to December’s 14.2% market share.
Cox reports preliminary data shows the average transaction price of a new vehicle in January exceeded the average manufacturer’s suggested retail price (MSRP) again. However, the average price declined 0.8% but was still up 5.8% from a year ago. The average MSRP fell 0.9% in January from December and was up 7.3% from a year ago.
Manufacturers spent an average of $1,386 per vehicle in January, Cox reports. This figure is up 4.8%. Incentives as a percentage of average transaction price increased to 2.8%.
Job growth and unemployment declines, from 3.5% to 3.4%, marking a 54-year low in unemployment in the U.S., should keep the automotive market strong.
But increases to the prime rate may limit consumer’s buying power. The Federal Reserve raised rates by a quarter point, with auto loan rates moving higher in January ahead of that increase. The Fed Funds Rate is now in the 4.50% to 4.75% range, which is the highest since 2007.
The Federal Reserve plans more interest rate hikes in the months to come and the strong labor market may create a need for more increases. These rate increases will likely be in quarter-point increments in March and again in May. Such moves would bring the terminal Fed Funds Rate to 5-5.25%.
