Dealers Forecast Modest Sales Decline in 2020

Matt Posky
by Matt Posky

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.]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

More by Matt Posky

Join the conversation
2 of 16 comments
  • TomLU86 TomLU86 on Dec 19, 2019

    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.

  • Dividebytube Dividebytube on Dec 19, 2019

    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.

  • IBx1 Never got the appeal of these; it looks like there was a Soviet mandate to create a car with two doors and a roof that could be configured in different ways.
  • CAMeyer Considering how many voters will be voting for Trump because they remember that gas prices were low in 2020–never mind the pandemic—this seems like a wise move.
  • The Oracle Been out on the boat on Lake James (NC) and cooking up some hella good food here with friends at the lake place.
  • ToolGuy Also on to-do list: Read the latest Steve S. fiction work on TTAC (May 20 Junkyard Find)
  • 1995 SC I'm likely in the minority, but I really liked the last Eldorado best. That and the STS.