Key Highlights:

  • The new-vehicle sales pace declined slightly in April but remained up substantially year over year as buyers were motivated to buy ahead of tariff-related increases to prices.
  • The used market saw month-over-month declines in sales volume but gains year over year. Used-vehicle prices increased.
  • The Fed left interest rate policy unchanged as it waits to see evidence of inflation and labor market deterioration from tariffs.

New-Vehicle Sales and Prices

The new-vehicle seasonally adjusted annual rate (SAAR), or sales pace, declined slightly in April but remained up substantially year over year as buyers were motivated to buy ahead of tariff-related increases to prices.

  • The April SAAR decreased by 3.1% to 17.3 million, which was up 7.8% from last year’s 16.0 million but down from March’s 17.8 million.
  • April’s strength was driven by retail sales, with fleet sales showing weak gains.
  • The average transaction price of a new vehicle in April increased by 2.5% from March to $48,699, which was up 1.1% year over year.
  • The average price relative to the average manufacturer’s suggested retail price (MSRP) was steady at 96.1%, so discounting did not change.
  • The average MSRP also increased 2.5% month over month but was up 1.9% year over year.
  • Manufacturer incentives declined by 2.1% month over month to $3,278, which was up 6.7% year over year.

Used-Vehicle Market

The used market also saw month-over-month declines but gains year over year. Used prices increased.

  • Retail sales volumes decreased by 1.7% in April compared to March, but they were up 13% year over year.
  • Certified pre-owned (CPO) sales declined by 7% month over month but were up 11.8% year over year.
  • Wholesale vehicle values increased by 2.7% in April on a seasonally adjusted basis, with the Manheim Used Vehicle Value Index rising to 208.2, which was up 4.9% from a year ago.
  • As of April 25, $265.7 billion in tax refunds had been issued, which was up 2% year over year, with the average refund being $2,945, up 3% year over year.

Federal Reserve and Interest Rates

The Fed left interest rate policy unchanged as it waits to see evidence of inflation and labor market deterioration from tariffs.

  • The Federal Reserve is focused on price stability and full employment, with its hands tied due to expected tariff-driven inflation.
  • While they wait to see evidence of inflation moving up, the labor market remains strong, even though labor market conditions are expected to deteriorate because of tariffs.
  • The path for rates is uncertain, and uncertainty doesn’t help consumers make plans for finance-sensitive purchases like vehicles.
  • The biggest change in auto loan rates over the last two months has been a direct response to tariffs, leading to tighter supply and higher prices in the new vehicle market.
  • Manufacturers have been spending less on attractive rate offers as a result. Since February, incentives are down; vehicle prices are up.
  • New auto loan rates increased by 10 basis points since February, just 26 basis points below a 25-year high reached last June.
  • Used auto loan rates declined by 64 basis points since February, averaging just over 14.1% last week.