- While the sales rate is still healthy, we’re now paying close attention to the impact of higher prices, higher interest rates, and tighter credit conditions on the consumer. While credit remains available to Prime borrowers (FICO scores from 660-759), their payments have likely increased by $10-15 per month on average.
- Subprime borrower, on the other hand, are struggling, as credit conditions are not allowing them to take on higher payments, as evidenced by average loan amounts essentially unchanged from last year, despite higher vehicle prices.
- This reinforces our belief that we’re seeing a portion of buyers pushed into the more-affordable used-car market when they previously would have been considering new, when rates were lower and credit conditions were looser.
Each month automotive industry experts from Cox Automotive and its brands host a sales day commentary call to provide insights into the previous month and to answer media questions related to market movement. The audio for the most recent call which covers the May selling month is available.
Automakers today reported May 2018 U.S. sales, with most coming in near or above the initial Cox Automotive forecast.
With General Motors, on May 25, our team forecast sales in May would be 265,000 units, a 11.7 percent increase over May 2017. With most auto makers now reporting, Cox Automotive is estimating May sales for General Motors came in near initial expectations.
Please find below commentary from the team at Cox Automotive. If you would like to speak with one of the expert analysts from Autotrader, Kelley Blue Book or any member of the Cox Automotive Industry Insights team, please contact us. We would be happy to help.
From Rebecca Lindland, Executive Analyst for Kelley Blue Book:
(On FCA) Thanks to an exceptionally strong showing by Jeep, FCA had a big May. After a few years of painful portfolio restructuring, Jeep is firmly on the upswing, buoying FCA’s performance with the brand’s strongest May ever. The Wrangler is hot as ever and the just-announced expansion of Jeep into the Wagoneer and Grand Wagoneer, along with additional trim lines such as the Desert Hawk and Trailhawk, there’s no stopping this iconic brand.
From Akshay Anand, Executive Analyst for Kelley Blue Book:
(On Nissan) Nissan’s down May was mostly expected, in part due to a changing strategy with long-term brand health in focus. What was very surprising was the entire SUV segment dipping in sales, with the high-volume Rogue being the notable exception. It’s clear Rogue will dictate much of Nissan’s successes or failures in the coming months, and things can get tricky for brands that rely heavily on just a few models for volume.
(On Toyota) Like so many others, the strength of Toyota’s May was in its SUVs, particularly Highlander and 4Runner. Also like many others, Toyota continues to struggle in the car segments, even with an all-new Camry. There may be opportunity for vehicles like Camry with Ford leaving sedan segments, but it will still be an uphill battle with American consumers.
From Karl Brauer, Executive Publisher for Autotrader and Kelley Blue Book:
Despite rising transaction prices and higher fuel costs the new vehicle market remains strong. Consumers continue to buy trucks and SUVs at an accelerated pace, more than offsetting the ongoing drop in car sales. Economic indicators suggest we’ll see this trend throughout the summer and fall, though talk of tariffs and the specter of $4-plus-a-gallon fuel could end the party, and inventory levels remain relatively high at several automakers.
From Brian Moody, Executive Editor for Autotrader:
(On FCA) FIAT/Chrysler success is all about Jeep. Specifically, the new Wrangler. Anyone worried that Jeep was going to mess up the Wrangler can rest easy – it’s a great utility vehicle and consumers are responding according. Note to used car dealers, if you want to increase floor traffic, get a bunch of Wranglers and park them out front.
(On Ford) Shoppers looking for an SUV and a great deal should visit a Ford dealer. Several of Ford’s well known and typically popular SUVs are seeing sale declines – now is the time to strike a deal on an Edge, Escape, Explorer or Expedition.
From Charlie Chesbrough, Senior Economist for Cox Automotive:
While the sales rate is still healthy, we’re now paying close attention to the impact of higher prices, higher interest rates, and tighter credit conditions on the consumer. While credit remains available to Prime borrowers (FICO scores from 660-759), their payments have likely increased by $10-15 per month on average. Subprime borrower, on the other hand, are struggling, as credit conditions are not allowing them to take on higher payments, as evidenced by average loan amounts essentially unchanged from last year, despite higher vehicle prices. This reinforces our belief that we’re seeing a portion of buyers pushed into the more-affordable used-car market when they previously would have been considering new, when rates were lower and credit conditions were looser.
From Zohaib Rahim, Research Manager for Cox Automotive:
It’s hard to imagine fleet sales dipping in May as OEMs continue to willingly supply the market with commercial and rental units. FCA pulled the fleet lever for the third straight month, as May fleet sales increased 16% versus May 2017. For FCA, sales into rental plays a major role in fleet strategy, as the rental channel accounts for 75 percent of FCA fleet sales. Looking at Nissan, fleet sales are likely lower than in Q1 2018, but we could see a rebound in rental fleet sales. Ford saw fleet sales decrease 5 percent in May, but light trucks sales into the commercial channel has been a big opportunity for Ford this year. Though fleet sales can help in the monthly reporting for OEM sales, across the board, we are not seeing any unhealthy fleet sales. Businesses are buying commercial fleets driven by tax reform, and rental companies are buying units across a variety of OEMs, not just one or two brands.
From Brad Korner, general manager for Cox Automotive Rates and Incentives:
While many shoppers would have focused on special Memorial Day Weekend sales and incentives, the truth is, there were strong deals in place throughout the month of May, particularly on pickup trucks and luxury. Incentives continue to be plentiful, which is helping the sales pace, although we are watching a noticeable pull-back in “0% Financing” products, as interest rate increases are making those more difficult.