No doubt about it: New-car sales have remained strong this month, albeit down a bit from year-ago figures.
But there are headwinds picking up speed, including some originating from the used-car market.
First, the new-car metrics expected this month:
According to Cox Automotive, the 1.36 million new-vehicle sales (including fleet) expected for November would be close to a 2.6-percent year-over-year decrease and close to par with October’s figures.
Of note, a year ago marked the best November for new-car sales volume at 1.39 million, a level that it is still “possible” to hit in the current month, Cox says, though reaching a record November SAAR (17.9 million, which occurred in 2015) would be harder due to seasonal adjustments.
The company pegs the seasonally adjusted annualized rate at 17.1 million for this November. In both November 2017 and October of this year, it was 17.5 million. However, this month’s projection is on pace with the 2018 average SAAR so far, Cox analysts said.
“The market continues to outperform our earlier forecast with expected headwinds being offset by other market factors,” Cox Automotive senior economist Charlie Chesbrough said in a news release.
“Looking ahead, affordability concerns — attributable to increasing interest rates, weakness in home construction and volatility in the stock market are growing headwinds to watch. However, sales in 2018 will be above 17 million, which is a very strong market indeed,” he said. “How long this pace continues is the key question.”
And it is one that may be influenced by various “risks” that could crop up, including some coming over from the pre-owned side, amid other factors around interest rates and tariffs.
The “aggressive leasing” from recent years has spawned not just millions of off-lease units hitting the market. They’re “gently used” cars that are rich in content, Cox said.
“Off-lease vehicle volume is expected to peak in 2019, and many potential new-vehicle buyers will be drawn to this value alternative,” analysts said.
Later in the report, they dove further into some of the impact specific to car segments.
In the auction lanes, a shift in consumer taste to crossovers and heavy off-lease car supply has led to falling prices for car segments over the last few years, Cox Automotive explained.
With cars being such an inexpensive option in the pre-owned market, this has helped dull demand for cars on the new side.
“However, used-car prices are now rising and at a quicker pace than some other used segments,” Cox analysts said. “As a result, used cars are not quite the bargain they were earlier in the year, and some car segment buyers may decide to buy new instead of used.”