Dealers Forecast Modest Sales Decline in 2020

According to the NADA Dealership Financial Profile Series from October 2019, the average new vehicle transaction price was $36,744 — up 3.9 percent compared to October of 2018. We imagine this would have been a little lower had manufacturers bothered to keep their smaller vehicles in North America. But this has worked out well for manufacturer-backed, certified pre-owned sales. According to Cox Automotive, CPO sales were up 2.9 percent through October 2019.

“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.”

Through the remainder of 2019, NADA expects incentives to remain high as demand weakens. Incentive spending set a new record in November, reaching an average of $4,520 per unit. This beat the previous record, set in December of 2017, and represents an increase of 11.6 percent vs November 2018. Going into 2020, the flow of factory cash should decline sharply in the opening months — like this year — before gradually creeping back up.

As for what people will be buying, NADA anticipates the brunt of 2020’s sales volume going toward light trucks:

As in 2018, consumers continued to abandon car segments in 2019. Light trucks are on track to account for more than 70 percent of overall new-car sales for 2019, while cars will account for less than 30 percent 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 percent light trucks and 52 percent cars.

“Consumers like the added practicality and ride-height afforded by light-trucks. And crossovers, which account for more than 40 percent 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.

While we disagree that the crossover craze will be permanent in the literal sense, there’s nothing to suggest consumers will snap back to cars anytime soon. The United States’ three best-selling models are all full-sized pickups, and this will probably be the case for the coming year.

[Image: Ford Motor Co.]

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