April new-vehicle sales to break record, J.D. Power predicts

(April 30, 2021) New-vehicle retail sales for April 2021 are expected to be the highest ever recorded for the month of April, according to a joint forecast from J.D. Power and LMC Automotive. Retail sales for new vehicles are projected to reach 1,325,500 units, a 110.6% increase compared with April 2020, and an 20.8% increase compared with April 2019, when adjusted for selling days.

April 2021 contains the same number of selling days as April 2020 and one more selling day than April 2019. Comparing the same sales volume without adjusting for the number of selling days translates to a year-over-year increase of 110.6% from 2020 and a 25.6% increase from 2019.

Total new-vehicle sales for April, including retail and non-retail transactions, are projected to reach 1,479,800 units, a 107.1% increase from April 2020 and a 7.8% increase from April 2019 when adjusted for selling days. Reporting the same numbers without controlling for the number of selling days translates to a 107.1% increase from April 2020 and a 12.1% increase from April 2019. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 18.1 million units, up 9.4 million units from 2020 and up 1.7 million units from 2019.

Thomas King, president of the data and analytics division at J.D. Power, said, “Despite low inventory, April 2021 will be another record-breaking month for the U.S. auto industry. Building on the strength that began in Q4 2020 and continued through Q1 2021, the industry will set records for April sales volumes, transaction prices, consumer expenditure and retailer profitability. However, with the sales pace exceeding the rate at which vehicles are being produced, compounded by significant production disruption due to microchip shortages, there is a growing risk to the industry’s ability to sustain the current sales pace in the coming months.

“While falling numbers of vehicles in inventory at retailers is the primary risk to sales results in the coming months, to date, low inventories have not had a material effect on aggregate sales results. Instead, they have enabled manufacturers and retailers to reduce discounts and consumers are demonstrating a willingness not only to buy vehicles closer to MSRP, but also to buy more expensive vehicles.”

Total retailer profit per unit, inclusive of grosses and finance & insurance income, are on pace to reach $2,697, an increase of $1,313 from a year ago. Grosses have been above $2,000 for eight of the last 10 months. Coupled with the strong retail sales pace, total retailer profits from new vehicle sales will be $3.5 billion, the highest ever for the month of April and up 151% from April 2019.

Average transaction prices are expected reach another monthly high, rising 6.8% to $37,572, the highest ever for the month of April and second highest all time on record behind December 2020. For context, average transaction prices are 20% higher in April 2021 than they were in April 2016 at $31,240.

“Record prices and retail sales mean that, in aggregate, consumers will spend more money on new vehicles than any April on record. Consumers will spend $49.8 billion on new vehicles this month, the highest ever for April and the third-highest consumer expenditure month on record — eclipsed only by the $51.2 billion spent in March 2021 and the $51.5 billion spent in December 2020," said King.

“Retailers continue to prove to be very adaptable to the current environment by turning inventory quickly to maintain sales pace as the average number of days a new vehicle sits on a dealer lot before being sold is on pace to fall to 50 days, down 34 days from a year ago. More notably, retailers are selling a larger proportion of vehicles almost as soon as they arrive in inventory.  This month, nearly one-third of vehicles were sold within 10 days of arriving at a dealership, up from one-fourth of vehicles sold within 10 days in April 2019.

“SUVs and trucks are on pace to account for a combined 76% of retail sales, flat with April 2020 and equal to the highest April on record. This is partially due to SUVs and trucks having a more limited inventory than cars. The last time SUV and truck share did not post year-over-year gains was in January 2013.”

The average interest rate for loans in April is expected to increase 46 basis points to 4.3 % from a year ago, on track for the first year-over-year increase since July 2019.