J.D. Power predicts November new-car sales will be up from year ago

(November 30, 2019) New-vehicle retail sales in November are expected to be up from a year ago, according to a forecast developed jointly by J.D. Power and LMC Automotive. Retail sales are projected to reach 1,182,400 units, a 1.2 percent increase on a selling-day adjusted basis compared with November 2018.

Reporting the same numbers without controlling for the number of selling days translates to an increase of 5.2 percent over last year. November 2019 contains one additional selling day than November 2018.

Total sales in November are projected to reach 1,444,200 units, which is flat on a selling day adjusted basis compared with November 2018. Reporting the same numbers without controlling for the number of selling days translates to an increase of 4.3 percent over last year. The seasonally adjusted annualized rate (SAAR) for total sales is expected to be 17.5 million units. This is up slightly from a year ago.

Thomas King, senior vice president of the Data and Analytics Division at J.D. Power says, “The industry is expected to show growth in November with the benefit of an additional weekend, but the gains are being accompanied by rising incentives. Strong promotional activity over the holiday weekend is expected to drive spending to the highest level ever.”

This year’s November sales month contains five weekends compared with four last year. With more than 200,000 sales anticipated over the holiday weekend, manufacturers are expected to target the large number of shoppers to help clear out record levels of older model-year vehicles.

Average incentive spending per unit is on pace to reach $4,538, an increase of more than 12 percent from last year and the first time ever above $4,500. The previous high for the industry was $4,378 set in December 2017. The average APR for finance deals in November is expected to fall to 5.3 percent, the lowest level since February 2018.

While high inventories of older model-year vehicles is a considerable factor in the year-over-year growth, incentive spending on newer models is expected to eclipse last year. Spending on 2020 model-year vehicles is on pace to reach $3,723, an increase of nearly 13 percent from a year ago.

Notably, incentive spending on a percentage basis is again growing at a faster rate than transaction prices. Manufacturer incentive spending as a percentage of MSRP in November is on pace to reach 11.1 percent, exceeding 11 percent for the first time in more than 10 years.

Transaction prices are expected to remain above $34,000 for the second consecutive month. Average prices for the industry are on pace to reach $34,054, down $179 from last month but up $622 from November 2018.

As a result, consumers will spend $40.3 billion on new vehicles in November. This is up $2.7 billion from last year and marks the fourth time this year that expenditures will exceed $40 billion.