The National Automobile Dealers Association offered up its official estimate for 2020 sales, expecting a slight drop next year.
The National Automobile Dealers Association posted its official auto sales forecast for the coming year, and it calls for sales of new vehicles to hit 16.8 million vehicles in 2020.
“We expect new light-vehicles sales will come in at 16.8 million units for 2020, roughly a 1.2% drop from 2019 sales volume,” said NADA Senior Economist Patrick Manzi. “As for 2019, it appears new vehicle sales will best the expectations of most in the industry by topping 17 million units for the fifth straight year, he said.”
The forecast is in the line with the University of Michigan ‘s prediction last month of light vehicle sales of 16.7 million units, which was echoed recently by executives from Toyota Motors North America.
(Tis the season – or the month – to buy a new vehicle)
“As the boost from deficit spending and tax cuts fades, annual real GDP growth slides to 2.3% in 2019 and to 1.7% in 2020–21. Light vehicle sales slow from 17 million units in 2019 to 16.8 million in 2020 and 16.7 million in 2021,” the economists from the University of Michigan said last month.
Sedans have been the sales laggard of the auto industry. That trend is expected to continue in 2020.
Analysts from Fitch Solutions, a subsidiary of Fitch Ratings Services, said this week global vehicle sales will grow marginally but remain below previous highs. The commercial vehicle segment will outperform the passenger vehicle sales.
NADA noted, “As in 2018, consumers continued to abandon car segments in 2019. Light trucks are on track to account for more than 70% of overall new-car sales for 2019, while cars will account for less than 30% of new-car sales. By then end of 2020, NADA projects that three of every four new vehicles sold will be light-trucks, a significant increase from a decade ago when the new-vehicle sales mix was 48% light trucks and 52% cars.
“Consumers like the added practicality and ride-height afforded by light-trucks. And crossovers, which account for more than 40% of the total new vehicle market, continue to increase in fuel efficiency each year – offering fuel economy close to their sedan counterparts. In the absence of a significant spike in gasoline prices for a sustained period of time, we expect this shift in preference as permanent,” Manzi added.
(Used car buyers getting more bang for their buck, report claims)
With consumer preference continuing to favor light-trucks over cars, new-vehicle transaction prices have steadily increased throughout the year. According to the NADA Dealership Financial Profile Series from October 2019, the average new vehicle transaction price was $36,744 – up 3.9% compared to October 2018.
U.S. new vehicle average transaction prices have risen throughout 2019.
In light of increased vehicle transaction prices and affordability concerns, franchised dealers have experienced growth in manufacturer-backed certified preowned (CPO) sales. Through October 2019, CPO sales are up 2.9%, according to Cox Automotive.
“The price gap between average monthly loan payments for new and used vehicles is widening and hit $159 in November 2019, according to J.D. Power.” Manzi said. “Consumers, even those with stellar credit, are choosing to buy pre-owned vehicles from new-car dealerships, which are uniquely positioned and qualified to sell CPO vehicles.”
In 2019, off-lease returns to dealerships are expected to top 4 million units and should remain near that level in 2020 – increasing CPO inventory and sales by franchised dealers.
Incentive spending, on average, hit a new record in November 2019 at $4,520 per unit. This value bests the all-time high set in December 2017 and represents an increase of 11.6% compared to November 2018, according to J.D. Power. Through the first four months of the year, incentives were down year-over-year, but have steadily increased since.
(U.S. new vehicle sales rise in November)
“With year-to-date new vehicle retail sales down by 1 to 2%, manufacturers have responded by offering more cash on the hood to entice buyers,” Manzi said. “We expect incentives to remain elevated in December as dealers clear out their lots to make room for new models.”