By on May 28, 2019

2018 Accord Sport 2.0-Liter Turbo - Image: Honda

May isn’t shaping up to be a sales winner for automakers doing business in the United States. Like past months in the current calendar, volume is predicted to decline, year over year, with the annual tally for 2019 expected to fall for the first time in years.

That’s according to a joint report from LMC Automotive and J.D. Power. Backing up the claims is a reversal of the recent trend of declining incentive spending, plus the fact that new cars are spending an increasing number of days sitting on lots. The most since the recession, in fact.

As reported by Aftermarket News, the forecast predicts May sales will fall 2.1 percent — a fifth consecutive month of year-over-year sales declines for an industry that eked out an unexpected sales gain of 0.3 percent in 2018. Year-to-date volume is expected to decline 5.2 percent through the end of May.

Unlike last year, total volume is expected to decline in 2019, with LMC forecasting 16.9 million new light-duty vehicles sales in the U.S. — a 2.5 percent drop.

“May is one of the highest-volume months of the year and its performance typically indicates how the year will play out,” said Thomas King, senior vice president of the Data and Analytics Division at J.D. Power. “The expected sales decline in May, coupled with weak sales year-to-date has left the industry with rising inventories of unsold vehicles. Manufacturers are responding with larger discounts to take advantage of the Memorial Day weekend, which is one of the busiest car-buying periods of the year.”

While incentive spending remains at a reasonable amount (9.1 percent of MSRP, on average), the current month’s figures show a change from the previous ten months: per-vehicle spending is up, albeit modestly. The average incentive spend rose by $25 per vehicle in May to $3,722.

The rising need to stimulate sales through discounts can be seen in how long vehicles linger. According to the report, new vehicles sold this month spent an average of 74 days on the lot — the highest figure for May since the unlucky year of 2009. The number of new vehicles spending 90 days or more on the lot is also on the rise, with May’s figure coming in at 29 percent. A year ago, that figure was just over a quarter of all vehicles. Fleet sales are expected to rise 1.9 percent compared to the same month last year.

Fueled by the growing popularity (and unavailability) of vehicles priced under $30,000, average transaction prices continue their upward climb, filling OEM coffers as new car sales drop. A record May ATP of $33,457 is expected to be set at the end of the month. Also, pre-owned inventory is tempting buyers in ever-growing numbers. The forecast predicts used vehicle sales will rise 5.9 percent, year over year, by the end of the month.

[Image: Honda]

Get the latest TTAC e-Newsletter!

Recommended

17 Comments on “Incentive Spending on the Rise As More Vehicles Loiter on Lots...”


  • avatar
    gtem

    It’s quite strange: last week I was looking on cars.com and was seeing scores of VERY deeply discounted new Kia Optimas at a Chicago area dealer, was tempted enough to email and get an OTD quote… sure enough, $12,800 plus tax/tags on a demo unit Optima LX (4k miles, new car warranty). I look again this weekend and all of this seems to have dried up?

    I actually waxed/detailed and listed our ’12 Camry on facebook (craigslist is now charging $5 per ad for private sellers?!), for $11k to see if I’d get any bites. The thought of resetting the clock back to a new car from the current 85k (over mostly horrible roads) on the Camry for about $3k was awfully tempting. Now that all those spectacular Kia deals have gone MIA… it is a less tempting proposition. I’m due for brakes in about 10k, thinking about an ATF drain/fill (tricky on these sealed Aisin 6spds), the ride is not what it once was over rough roads, I’m due for a bit of maintenance and refreshing if I keep it long term.

    • 0 avatar
      Scoutdude

      Well a almost new car for $12,800 is a heck of a deal so it wouldn’t surprise me if they sold out quickly. Or they moved enough of them to meet their goals and jacked the price up to the point they can make a profit on the rest of them.

  • avatar
    ToddAtlasF1

    If you look at the numbers, something less than 4% of Americans buy or lease a new car or truck for personal use in any given year. If you consider the average time people keep their new vehicles, you can extrapolate that something less than 30% of Americans will ever buy a new car. In any five years period, it is probably no more than 10%. There’s a very good chance that a significant percentage of that 10% of the population is informed enough to know they don’t want a turbo-direct-injection engine, or a complex transmission introduced in the past year with its replacement already being discussed as CAFE ratchets up. The credit consumer types will keep trying to buy or rent disposable fulfillment, but a small shift in buying behavior from people who buy new cars every five to ten years could be making for some old inventory at dealers.

    My hometown Honda dealer is advertising new 2018 everything. Honda should be hit the worst by replacing their exceptional cars with VCM, ZF, CVT, DI, Turbo riddled mediocrities. They were cars for people who know about cars. Now, they are not.

    • 0 avatar
      gtem

      My friend’s ’17 Civic is a mess. Horrible panel gaps/alignment, he’s taken it in for a failed wiper linkage, some kind of subframe/suspension noise, and in just 2 years the rubber cowl trim has failed/cracked at the corners (bad material). Unrecognizable as a Honda IMO. My 2012 Civic was faultless for the 53k miles I had it.

    • 0 avatar
      redgolf

      I was in a Honda dealership a couple of months ago, with my friend, he and his family are avid Honda only, he wanted to look at an HRV, we took one look at the sticker on a showroom Odyssey van – $54,000, yikes!, he exclaimed, “I think I’ll keep my 2000 running”!

      • 0 avatar
        highdesertcat

        “As More Vehicles Loiter on Lots…”, I have noticed that all dealers in MY area have cut back on selection and floorplan. But many dealers in my area do not pass along all of the factory incentives to the buyers. Probably to offset their lower sales numbers.

        A potential buyer has to travel to the bigger cities to find a better selection and the bigger discounts, because the dealers in the bigger cities have a greater number of sales, better cash flow, and quicker turn around of their money.

        It’s surprising to go online and see the difference in selection and prices between local/small town dealers and those in Las Cruces, El Paso, Albuquerque, Santa Fe, Colorado Springs, Tucson, Phoenix, and others.

    • 0 avatar
      sportyaccordy

      “There’s a very good chance that a significant percentage of that 10% of the population is informed enough to know they don’t want a turbo-direct-injection engine, or a complex transmission introduced in the past year with its replacement already being discussed as CAFE ratchets up.”

      I’m gonna say no, not very likely. Most people don’t know a differential from a dipstick, including new car buyers. And even with the increasingly longer ownership periods, most new car buyers aren’t keeping transmissions long enough for them to be problematic. To add to that, automatic transmissions aren’t super unreliable these days, even factoring in the “lifetime but not really” fluids.

      The causes of the frailty of the market are pretty simple. I don’t buy that cars are more expensive- there are plenty of good affordable cars out there. But credit is more expensive, and cars are more durable + less of a status symbol, providing less of an incentive for replacement. There are some reliability issues here and there but even Toyotas are down in sales. We don’t need 16-17 million new cars a year. I honestly think we could get by with about 10-12.

      • 0 avatar
        87 Morgan

        Sporty…the only flaw in the 10-12 new sales a year is we still crush north of 14M. Unless we see a steep decline in licensed drivers 14m give or take 100k is essentially the break even point. Though one or two years at 10M or slightly higher would certainly clear out the remaining inventory of late 90’s/Early 00’s full size GM SUV, Explorers and volume JDM sellers (Camry, Accord) of the time that we still see daily on the road in varying degrees of disrepair and force the issue of new sales once again.

        **Crush includes wrecks, no longer serviceable etc.**

        Side thought, the one car I saw a bunch of at the pick n pull was the early 00’s Durango that came with the 5.9 liter (basically the old the 360 CID) and I was thinking that perhaps these were being retired sooner than the other SUV’s of the era due to the absolute love fuel the 5.9 has.

      • 0 avatar
        ToddAtlasF1

        Intellectual-haves may not be an important demographic when you’re marketing iPhones or coffees, but when you have a dozen competitors for a market that is less than 4% of the population every year, they only have to be 3% of the population who were buying an average of one new car every five years to cause a glut in unsold cars. Most people might be pretty ignorant, but only a small percentage of ignorant people are ever in a position to buy a new car. That might still make them a majority of new car buyers, but every sale counts when the market is shrinking. Writing off every informed consumer is dumb in this environment.

    • 0 avatar
      mtunofun1

      Don’t forget that there’s a cohort of people who buy a new vehicle if their car gets totalled. Probably not big but significant enough.

  • avatar
    SCE to AUX

    “incentive spending remains at a reasonable amount (9.1 percent of MSRP, on average)”

    Pretty terrible, IMO, that mfrs have to provide 9.1% funny money discounting just to move inventory. And that’s just the beginning of the games they play. I guess this appeals to those who buy cars based solely upon the monthly payment, believing they got a good deal regardless of the number of payments.

    No wonder the 3rd-party no-haggle outlets are thriving.

    • 0 avatar
      jack4x

      No different from any other consumer purchase that relies on “X percent off” sales or minor holiday sales events. Just as very few pay the inflated MSRP for a refrigerator or a lawn tractor, so it is with cars.

  • avatar
    tankinbeans

    Now I’m curious if I can get a deal on a 2.0T 6MT Accord.

  • avatar
    Steve203

    By a lucky coincidence GM and Ford, and soon FCA, only report sales quarterly so they don’t need to face impertinent questions each month about them bleeding volume while they keep chasing ever higher ATP and GM/vehicle.

  • avatar
    tomLU86

    @gtem

    1. How much have you spent in REPAIRS (not maint or tires/brakes) on your Camry?

    2. If it had warranty, how inconvenient has it been?

    If less than $500, and no inconvenience, keep the Camry. Yes, as you noted the ride will degrade, it will get more squeaks and rattles.

    I DID put the money into a plain, but very reliable, 2011 Malibu. Between 92k and 97K, I put brakes (1st set), and flushed radiator and trans (I paid the dealer to do this stuff, he was fairly competitive and had not annoyed me during routine maintenance by trying to upsell me).

    I decided that Malibu was plain and old, and about a year after this work, with 102k, I got a certified used Regal. NICER and NEWER (and since my GM Epsilon Malibu was so bulletproof, with only broken…driver seat springs, $300 in 102k), I figured that, except for the turbo engine (question mark), the Buick would be equally trouble-free. It’s just a newer Malibu… And Consumer Reports loved it.

    I test drove a new one and liked it. SO, why not. I bought a “Certified Used”

    I really like the way it drives. It has better A/C (the Malibu’s biggest shortcoming). More power than I need.

    “Certified Used”. With a “Bumper-to-Bumper Limited Warranty”. That contradiction has probably permanently debased “Certified Used” for me, as the Regal, from 25k to 45k, while not a lemon, has required some pricey repairs (2 wheel bearing–warranty paid, and FOUR shocks/struts–warranty did not pay, but apparently I shamed dealer into doing it for $400, vs $2000). The vanity mirror on the driver side was either broken when I got the car, or broke. Probably the 1st or 2nd time I flipped it. THey refuse to fix that at no charge.

    So my experience is, if you’re happy with your car, keep. I was content. My Malibu probably would have needed new struts/shocks had I kept it. It would need another headlamp (I will never replace a headlamp that requires removing the bumper cover again. Ever. I’ll pay some one). Perhaps an expensive repair. But maybe not. I’ll never know if my decision paid off financially.

    I do think new cars have a lot of stuff that will break down…but it gets better. For example, power windows: That’s an expensive repair, but they seem to be holding up much better than I remember (I’ve fixed in 2 cars, a 85 Ford and a 97 Pontiac)

    I wish I could buy a “new” 85-86 Golf GTI. With just a radio. No A/C. No sunroof. No options. By now, they would be pretty reliable.

  • avatar
    bd2

    As of April 1, the manufacturers in the best shape when it came to inventory on the lots was Subaru, followed by H/K.

    Nissan (surprisingly) was in better shape than had expected; guess their plan to cut excess inventory has been working.


Recent Comments

  • dividebytube: Going to Charleston, SC and the Isle of Palms, my wife and I decided to rent a convertible. At the...
  • indi500fan: Small cars need bright colors on the outside and light colors on the interior. The paint color above...
  • energetik9: I’m sure it varies by location. They are somewhat common here. Even i8’s occasionally too.
  • Matt Foley: What the hell is a “white national”? Max Scherzer? Brian Dozier?
  • energetik9: A few years ago, I was traveling often and renting cars frequently. My most surprising upgrades? A C6...

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States
  • Moderators

  • Adam Tonge, United States
  • Corey Lewis, United States