By on December 18, 2019

The National Automobile Dealers Association (NADA) released its annual new-vehicle sales forecast for 2020, estimated a modest decline in U.S. volume. The announcement dropped on Tuesday, citing rising transaction prices as the probable cause. With fewer sedans on the market (especially among domestic automakers), customers are shifting to crossover vehicles with higher price tags. Fortunately, the United States’ economy has remained roughly as stable as the cost of fuel — avoiding market conditions that normally encourage customers to swap into affordable economy cars or simply hold onto their current ride.

“We expect new light-vehicles sales will come in at 16.8 million units for 2020, roughly a 1.2 percent drop from 2019 sales volume,” NADA senior economist Patrick Manzi explained. “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.”

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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16 Comments on “Dealers Forecast Modest Sales Decline in 2020...”

  • avatar

    Isn’t this the 3rd of 4th straight year they’ve projected this? I mean eventually they’ll be right I guess.

  • avatar
    Felix Hoenikker

    The toxic combination of higher transaction prices and decreasing loan FICO scores is not a good omen to maintain auto sales at their current volumes.

    • 0 avatar

      Agreed. Vehicle prices have risen a lot faster than inflation and income over the past ten years. While there are still some values to be had, they are outliers in the automotive landscape. As prices creep higher, fewer people are able to buy new and of those that can, more people take on risky loans to afford a new car.

  • avatar

    So OEMs will build less sedans and push more (expensive) CUVs, pickups and SUVs.

    Except it’s heroic when Toyota does it.

    • 0 avatar

      “Except it’s heroic when Toyota does it.”

      Yaris, Corolla, Prius, Camry, Avalon (+ Mirai, the 86, and now Supra). That’s at least five models that come in non-CUV, pickup, or SUV format.

      • 0 avatar

        The Supra is a BMW and the 86 a Subaru. Some are low volume, but do you really think Toyota wouldn’t rather sell you a truck of some sort? With AWD or 4X4 especially? How is that different from Ford?

  • avatar

    Are light truck sales expected to go down because people are trading F-250s for F-450s, which are medium-duty trucks?

  • avatar

    For everyone claiming that carmageddon is upon us like 2008/2009, it’s important to note that automakers today are far more nimble than they were 10 years ago. They’re much better at matching supply and demand now than before.

  • avatar
    Jeff S

    At least Toyota still makes cars and Toyota cars don’t have a double clutch transmission. Ford has made some bad cars recently so it is no mystery besides declining demand for sedans that Ford is getting out of making cars. Hackett is dismantling Ford.

  • avatar

    It’s been a good run.

    Prediction makes sense: if interest rates stay low and fuel prices remain steady, expect the same, just a little less.

    1973 was a banner year, record until 1985 or 86. The party ended with energy crisis and a recession.

    US population: 212 million. US Sales: 15.5 million (from memory)

    85% of sales where from US carmakers, with cars and their components made in the US or Canada. While UAW workers were at the top of the food chain, even supplier company workers made decent enough wages to buy the cars their parts went into. The UAW worker set a floor for Salaried workers wages. That in turn pulled up white collar jobs in other areas. Execs made good money. That helped the economy.

    Today, our better, and more highly contented vehicles may be at record high transaction prices, BUT, thanks to outsourcing parts (mostly to Mexico, but also China, and Korea), as well as vehicles (to Mexico), and to a lesser extent, better supply chains, the price of vehicles has increased very slowly, certainly not as much as the content. Still, I’d venture to guess the percent of Americans today who can afford a new car is much lower than 1973.

    Conversely, the percent of Americans who can afford, and choose to buy or lease, ‘expensive’ vehicles, is probably larger too. In 1973, the most expensive US cars probably were $8-9k, or $40-54k inflation adjusted. That’s probably what 911 cost. A top Benz sedan…IDK, let’s say $12k, or $60-72k inflation adjusted.

    Today there are quite a vehicles going for $80, 90, 100k. $150k for a 911, right?

    Used cars are better, but still used, with a potential big repair lurking in the background.

    2019. US population 329 million. US Sales: 17 million. FIVE ‘banner’ years

    Over 85 million sold in the last 5 years.

    Cars are much better, rust much more slowly, last longer, require less maintenance, but repairs can be pricey. Much more suburban sprawl than in 1973, more drivers, each driving more miles on average, yet I would be willing to bet that motor fuel consumption has NOT increased proportionately, thanks to more economical vehicles. That Vista Cruiser that got 10-12 mpg has been replaced by a Traverse or Telluride that gets 16-24.

    Just some random thoughts on a Thursday afternoon.

  • avatar

    My wife and I are double-income, higher than average wage but even we don’t want to pull the trigger on a new car. It’s the depreciation. I still don’t like spending more than $18-20k, which is still a lot of car. A few year old Mustang or Challenger is a better deal to me than a new KIA.

    My wife, who is a lawyah, still is a cheapskate at heart. Driving a 11 (soon to be 12) year old car. No rush to upgrade.

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