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The U.S. new-vehicle sales forecast improved to 17.42 million units in March, but sales fell 3.1% year-over-year against slowing demand fueled by higher interest rates, prices, and payments and reduced incentive spending.
Despite the expected volume decline, the firm put September’s seasonally adjusted annual sales rate at a healthy 17.1 million, down from last September’s 18.1 million SAAR. The company said higher interest rates and talks of tariffs may be having some pull-ahead impact in the market.
June’s annual percentage rate of 5.82% marked a 17% increase since January 2018. Add rising rates to a virtually saturated U.S. market, record-high vehicle prices, and historically high numbers of people who owe more than their cars are worth, and the stage is set for a market contraction, the firm said.
May new-vehicle sales grew by 4.8% from the year-ago period, while average incentive spending per unit grew 6.6% from a year ago to $3,740.
Average incentive spending in February is poised to fall for the first time since 2013 due to lower spending by Domestic manufacturers on trucks and SUVs. The two firms also project a 400,000-unit decrease in the SAAR and a 3% decline in retail sales.
Total new-vehicle sales didn't grow for the first time since the Great Recession, but the American International Automobile Dealers Association said last week its member dealers remain optimistic about 2018.
Underperforming van and car segments led to a decline in J.D. Power's used vehicle price index in November, a reversal from the index's previous three months of consecutive growth.
Despite the expected decline, October looks to be relatively strong on strong replacement demand in hurricane-impacted states and higher incentive spending. Kelley Blue Book analysts, however, believe these are indicators that new-vehicle demand is still contracting.
The Manheim Used Vehicle Value Index reached a record high in September for the fifth consecutive month, while the SAAR rose to its highest September reading in three decades. The main driver was replacement demand caused by hurricanes Harvey and Irma.
Kelley Blue Book said replacement demand driven by hurricanes Harvey and Sandy is already being felt in some areas. The firm predicts that will continue into October and potentially November as vehicle insurance payouts are received.