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May Auto Sales Lag Again Despite Holiday Discounts

May Auto Sales Lag Again Despite Holiday Discounts

By Philly Murtha, May 25, 2017

Memorial Day weekend rebates won’t lift May U.S. new-vehicle sales above last year’s results, according to a J.D. Power and LMC Automotive forecast update. Based on sales data from the first two weeks of the month, total (retail and fleet) May deliveries are set to fall 3.5% from a year ago to 1.54 million units, when adjusted for one extra selling day this year (25 days in May 2017 vs. 24 days in May 2016).

“The holiday weekend is one of the heaviest trafficked car-buying periods in the year and, in 2016, the Friday-Monday selling period accounted for more than 20% of May retail sales,” said Deirdre Borrego, J.D. Power’s senior vice president of automotive data and analytics. On an adjusted basis, retail deliveries will dip 2.9% below last May, while fleet deliveries are expected to drop 5.8% below last year and account for 20.8% of total sales.

Auto Sales

The update indicates that during the first 11 days of May, the average new-vehicle incentive was $3,583 per unit, the highest level for any May and up $241 from May 2016. The average rebate accounted for 9.9% of a new vehicle’s MSRP. At the same time, the average new-vehicle retail transaction price also increased in May to $31,419—a record for the month.

Still, these higher incentive levels have been unable to prime sales. J.D. Power’s Borrego said that a new car remains on a dealer lot before selling an average of 70 days—the highest rate since 2009. Trucks continued to be the most popular—accounting for 61.7% of retail new-vehicle sales in May. Additionally, incentive spend on trucks and SUVs is lower than for cars—$3,358—up $187 from last year vs. car spend, which is $3,942, up $344.

In further comments, Jeff Schuster, senior vice president of forecasting at LMC Automotive, alerted that although the weakness is troubling, sales could strengthen in the second half if “uncertainty dissipates, tax cuts are initiated, or automakers continue to raise incentives.” He again cautions that a growing used-car market and rising interest rates are possible obstacles.

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