September Sales Decline Due to Timing of Labor Day Weekend But Combined August-September Results Show Retail Growth

J.D. Power:

The Total Sales Forecast

Total new-vehicle sales for September 2024, including retail and non-retail transactions, are projected to reach 1,164,900, a 1.8% decrease from September 2023 on a selling day adjusted basis, according to a joint forecast from J.D. Power and GlobalData. September 2024 has 23 selling days, three fewer than September 2023. Comparing the same sales volume without adjusting for the number of selling days translates to a decrease of 13.2% from 2023.

The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 15.8 million units, flat from September 2023.

New-vehicle total sales in Q3 2024 are projected to reach 3,882,600 units, a 0.2% increase from Q3 2023 with two less selling days.

The Retail Sales Forecast

New-vehicle retail sales for September 2024 are expected to decrease from a year ago. Retail sales of new vehicles are expected to reach 960,500, a 3.9% decrease from September 2023 when adjusting for selling days. Comparing the same sales volume without adjusting for the number of selling days translates to a decrease of 15% from 2023.

New-vehicle retail sales in Q3 2024 are projected to reach 3,263,500 units, a 1.4% increase from Q3 2023 with two less selling days.

The Takeaways

Thomas King, president of the data and analytics division at J.D. Power:

“September sales volumes will be lower than a year ago because of a calendar quirk that saw the Labor Day holiday weekend fall into the August sales month. This boosted August’s sales but will diminish September’s sales from a year ago. When August and September results are combined, retail sales increase 2.6% year over year.

“Retail inventory is projected to be 1.8 million units, a 6.2% increase from August and a 30.7% increase from September 2023. Rising inventories are leading to larger discounts from both manufacturers and retailers. However, the inventory situation continues to be inconsistent across brands and models, with some popular vehicles remaining in short supply.”

The average new-vehicle retail transaction price has fallen from a year ago due to higher manufacturer incentives, larger retailer discounts and increased availability of lower-priced vehicles. Transaction prices are trending towards $44,467—down $1,296 or 2.8%—from September 2023. The combination of lower retail sales and lower transaction prices means that buyers are on track to spend nearly $40.4 billion on new vehicles this month—16.8% lower than September 2023.

“Total retailer profit per unit—which includes vehicles gross plus finance and insurance income—is expected to be $2,294, down 29% from September 2023. Rising inventory is the primary factor behind the profit decline and fewer vehicles are selling above the manufacturer's suggested retail price (MSRP). Thus far, only 13.6% of new vehicles have been sold above MSRP, which is down from 26.1% in September 2023.”

Total aggregate retailer profit from new-vehicle sales for this month is projected to be $2.1 billion, down 39% from September 2023.

“Increased inventory means fewer vehicles are being pre-sold by retailers, with more shoppers able to buy directly off dealer lots. J.D. Power forecasts that 32.4% of vehicles will sell within 10 days of arriving at the dealership, down from a peak of 58% in March 2022. The average time a new vehicle remains in the dealer's possession before sale is expected to be 48 days, up from 29 days a year ago.”

Manufacturer discounts are continuing to rise. The average incentive spend per vehicle has grown 63.2% from September 2023 and is currently on track to reach $3,047. Expressed as a percentage of MSRP, incentive spending is currently at 6.2%, an increase of 2.4 percentage points from a year ago. Spending has decreased by $21 per unit from August 2024.

“One of the drivers of higher incentive spending from a year ago is the increased availability of discounted lease payments. This month, leasing is expected to account for 21.8% of retail sales, up a single percentage point from 20.8% in September 2023.

“While attractive lease deals are driving lease mix upward, the industry continues to contend with the long-term effects of reduced leasing activity from three years ago. The number of leases expiring this September is 13.1% lower than in August and 28.1% lower than September 2023. Fewer expiring leases mean fewer opportunities for new sales.”

Average monthly finance payments this month are on pace to be $734, up $11 from September 2023. The average interest rate for new-vehicle loans is expected to be 6.84%, down 46 basis points from a year ago.

So far in September, average used-vehicle retail prices are $28,465, reflecting a decrease of 3.2%—down $937—from a year ago. The decline in used-vehicle values is translating to lower trade-in equity for owners, now trending towards $7,886, which is down $1,120 from a year ago.

“In October, attention will center on the evolving effect of recent interest rate cuts. While the rate adjustment is a positive for the industry, the effect will be neither immediate nor linear whether it’s improving vehicle affordability for consumers, reducing the cost of low APR deals for manufacturers or helping retailers with floorplan expense. Furthermore, the effect on monthly payments will be blunted by the ongoing decline in trade-in equity. The drop in trade-in equity is one of the reasons why monthly payments are up from a year ago even though transaction prices are falling.”

Sales & SAAR Comparison

The Details

• The average new-vehicle retail transaction price in September is expected to reach $44,467, down $1,296 from September 2023. The high for any month—$47,329—was set in December 2022.
• Average incentive spending per unit in September is expected to reach $3,047, up $1,210 from September 2023. Spending as a percentage of the average MSRP is expected to increase to 6.2%, up 2.4 percentage points from September 2023.
• Average incentive spending per unit on trucks/SUVs in September is expected to be $3,243, up $1,296 from a year ago, while the average spending on cars is expected to be $2,208, up $803 from a year ago.
• Retail buyers are on pace to spend $40.4 billion on new vehicles, down $8.2 billion from September 2023.
• Trucks/SUVs are on pace to account for 80.8% of new-vehicle retail sales in September.
• Fleet sales are expected to total 204,416 units in September, up 9.2% from September 2023. Fleet volume is expected to account for 17.5% of total light-vehicle sales, up 1.8 percentage points from a year ago.
• Average interest rates for new-vehicle loans are expected to be 6.84%, down 46 basis points from a year ago.

EV Outlook

Elizabeth Krear, vice president, electric vehicle practice at J.D. Power:

“In September, the interest in EVs by new-vehicle shoppers reached a low point for the year. Just 21.7% of new-vehicle shoppers said they were ‘very likely’ to consider an EV for their next new-vehicle purchase, a 4.2-percentage-point drop from a year ago. Some might call it the ‘Summertime EV Blues.’

“Even though fewer shoppers are considering EVs, the sales share for EVs peaked at 9.4% in August and has held through mid-September, which is a pretty healthy position. The contradiction of lower interest and higher sales will lead many to ask, ‘How can that be?’ The answer is simple: incredibly discounted transaction prices. Buyers are always looking for a deal, and what they’re paying now for an EV—thanks in part to federal incentives—is less than the comparable segment average price in both mass market and premium segments.”

Global Sales Outlook

Jeff Schuster, vice president of research, automotive at GlobalData:

“In August, the global light-vehicle selling rate remained steady at 89.3 million units, consistent with July, indicating a stable overall market. However, due to the strong performance in August 2023, global volume decreased 4% year over year. The year-to-date selling rate through August now stands at 86.6 million units, with volume up only 1% from the same period a year ago.

“With the exception of Brazil and Russia, all major markets experienced a decline in the August selling rate from August 2023. Western Europe stood out with a selling rate increase of 1.3 million units in August from July. Sales in China and North America remain stable but are not indicating a return to the growth rate previously anticipated in the second half of 2024. India (+4%), North America (+4%), and Pan-Europe (+2%) are surpassing the global market pace on a YTD basis. On the other hand, China (-2%), Japan (-9%) and Korea (-9%) offset the gains in the other major markets.

“The selling rate is expected to increase in September and is forecasted to improve to 91 million units. However, volume is still expected to contract 1% from September 2023, which would mark the fourth consecutive monthly year-over-year decline. North America, ASEAN and Western Europe all face challenging year-over-year comparisons, but China and Japan are projected to post gains.

“The 2024 forecast for global light-vehicle sales has been revised down for the fourth time this year, from 89.3 million units at the beginning of the year to 88.5 million units this month, a reduction of 1%. Growth from 2023 has now settled at 2%. The primary factors influencing demand trends remain elevated pricing, geopolitical risks and global economic performance.”

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