Auto Market Weekly Summary

New-vehicle sales in March were up from February but down from a year ago. The seasonally adjusted annual rate (SAAR) declined to 13.3 million from 14.1 million in February, as tight supply, record low incentives, and worsening production challenges held back the usual seasonal gain. Manufacturers continue to prioritize retail over fleet, as sales into large rental buyers were down 19% from a year ago in February.

The used market also failed to see the normal March surge. Used retail sales increased 37% in March from February but were down 15% from last year. Wholesale used car prices declined on a seasonally adjusted basis in March, as the month did not see the normal pattern of price increases driven by the normal surge in demand from tax refunds.

The issuance of tax refunds is several weeks behind the normal pace this year. Based on IRS statistics through April 1, we estimate that 49% of this year’s likely number of tax refunds had been issued, when for the same week in 2019, 77% had been disbursed. The market will likely see a stronger April performance as the average refund is at a new record and up 12% year-over-year.

New initial jobless claims fell to a 54-year low while continuing claims are at a 52-year low. Consumer sentiment improved as gas prices declined week-to-week.

New-vehicle sales decline: March total new-light-vehicle sales were down 22% year over year, with one less selling day compared to March 2021. By volume, March new-vehicle sales were up 19% over February. The March SAAR came in at 13.3 million, a 24% decline from last year’s 17.6 million, and down 5% from February’s 14.0 million pace.

Combined sales into large rental, commercial, and government buyers were down nearly 4% in March compared with a year ago. Sales into rental were down 19% from a year ago, while sales into commercial fleets were up 19% and sales into government fleets were down 2%. Including an estimate for fleet deliveries into the dealer and manufacturer channels, we estimate that the remaining retail sales were down 23% in March compared with a year ago, leading to an estimated retail SAAR of 11.3 million, which was down 27% from 15.4 million last March and down 7% from last month’s 12.2 million rate.

Tight supply and new challenges in production are limiting the growth in new vehicle sales that would typically happen as the year progresses. Incentive spending by manufacturers fell to an average of $1,478 in March, down 10.8% from February and down 56.7% year-over-year.

According to Kelley Blue Book, the average transaction price exceeded the average MSRP for the tenth month in a row, and the average price was a record 9% greater than the average invoice in March.

Used-vehicle sales disappoint: We estimate that used-vehicle retail sales increased 37% in March from February but failed to show the typically even larger seasonal increase driven by tax refund season. These estimates indicate that used retail sales were down 15% from a year ago. CPO sales were down 19% compared with last March but increased 21% from February.

The issuance of tax refunds is several weeks behind the normal pace this year. Based on IRS statistics through April 1, we estimate that 49% of this year’s likely number of tax refunds had been issued, when for the same week in 2019, 77% had been disbursed. The market will likely see a stronger April performance as the average refund is at a new record and up 12% from a year ago.

Wholesale prices decline: Wholesale used-vehicle values, according to the Manheim Used Vehicle Value Index, declined 3.3% in March on a seasonally adjusted basis. The declined left the Index at 223.5, which was up 24.8% from a year ago. The non-adjusted price change in March was an increase of 0.6% compared to February, leaving the unadjusted average price up 23.2% from a year ago.

Manheim Market Report (MMR) values saw weekly price increases that accelerated in each full week of March after the first week saw the smallest decline of the year. Over the last four weeks, the Three-Year-Old Index increased a net 1.2%. All major market segments saw year-over-year performance, followed by compact cars, while pickups and luxury cars lagged the overall market.

On a month-over-month basis, all major segments saw seasonally adjusted price declines, with pickups declining the most. The seasonal adjustment drove most of the declines. Most major market segments saw price gains from February, with midsize and compact cars increasing the most, while vans declined.

Unemployment drops: As of March 26, 1.52 million people were on traditional unemployment benefits. That number was the lowest since March 1970. The broadest measure of continuing benefits declined to 1.72 million, which was 380,000 lower than the 2.10 million level prior to the pandemic. Initial claims were 166,000 in the latest week and that was a 54-year low. Initial claims averaged 212,000 per week in 2020 in the weeks before the pandemic began.

Consumer sentiment edging up: The index of consumer sentiment from Morning Consult increased 1.7% week-to-week as of last Friday. It ended March down 1.4% from February but has started April up 2.2%. As of last Friday, the index is down 14.6% from a year ago and down 24.6% from February 29, 2020. Sentiment has improved since gas prices peaked and have since declined slightly. The average price for unleaded was down 1.8% week-to-week as of last Thursday.

ICYMI: The Q1 2022 Manheim Used Value Index Call was held on Thursday, April 7. Watch the replay.

The next Auto Market Report video will be published on Smoke on Cars on Tuesday, April 12.

Jonathan Smoke is the chief economist at Cox Automotive.