New Car Inventories Continue To Grow
Automotive News reported that US new vehicle inventories was 4.19 million vehicles at the beginning of April. That number is the highest inventory level since 2004. New car sales are slowly starting to decline. In March, the seasonally adjusted annualized sales rate (SAAR) was lowest since February 2015. Also, manufacturers have been reluctant to slow production.
With sales slowly dropping but production continuing at the same pace, inventories have nothing to do but go up.
The good news for customers is that manufacturers are ramping up incentives to battle their growing inventories. According to J.D. Power, average new car incentives are a slightly above 10 percent of the “sticker” price. A normal rate of incentives is typically 8.5 percent.
The bad news for customers is that as manufacturers continue to increase incentives on new models, the value of used cars and their trade-ins will continue to decrease.
Manufacturers will soon have to decide if they feel new car sales will continue to slightly decline or if they will return to the same levels we saw in 2015 and 2016. If they feel sales will continue to decline, they will have to keep increasing incentives or cut back on production.