Car sales rise as UC data reveals uncertain road
Auto sales set records for April, and there are signs that strong sales will continue into May despite high prices and tight supplies for new and used cars, Cox Automotive chief economist said on Tuesday. , Jonathan Smoke.
“March has been one of the strongest in retail vehicle sales history, and it looks like April has seen even more strength,” he said in his weekly video report “Smoke on Cars”.
“The used vehicle market has seen a slowdown in the last week of the month, but the new vehicle market – one way or another – has gained momentum despite an ever tighter supply. and record prices.
The consumer survey of data analytics firm from Irvine, Calif., Showed an increase in the number of buyers who intended to buy a car this month. Smoke said a continuing factor to drive new car sales is a consistently high level of zero percent financing offers from captive lenders.
The share of zero percent funding was 9.8% in April, up from 10.1% in March and a peak of 21.3% in April 2020 during the first weeks of the COVID-19 pandemic. From 2017 to 2019, only around 3% to 5% of offers offered zero percent financing.
Competition from captive lenders is one reason credit unions have underperformed the market over the past year.
The latest data from the CUNA Mutual Group Credit Union Trends Report showed that credit unions held $ 142.1 billion in new auto loans as of February 28, down 4.2 percent from the previous level. last year. From February 2019 to February 2020, new auto loans fell 0.3%.
Credit unions had $ 242.7 billion in used car loans on Feb.28, up 4.3% from the previous year and about the same growth rate as the previous 12 months .
By comparison, non-auto loans from credit unions increased 7% to $ 811.7 billion in the 12 months ending February 28, mainly on the increase in mortgages.
A better comparison will come on Friday, when the Fed releases its March G-19 consumer credit report, which will include auto loans from all lenders.
Cox Automotive and a report jointly released on April 28 by JD Power and LMC Automotive chose to include comparisons to 2019, rather than just 2020, when numbers climbed or fell in the months after the COVID pandemic was declared. -19 March 11, 2020.
The JD Power and LMC Automotive report predicted that dealers would sell 1.3 million new cars in April, more than double in April 2020 and up 20.8% from April 2019 after adjusting sales days.
Average transaction prices are expected to hit another monthly high, rising 6.8% to $ 37,572, the highest on record for an April and the second highest for a month after December 2020. Looking back five years, the April 2021 prices were 20% higher than the $ 31,240 paid by consumers in April 2016.
“Record prices and retail sales mean that, overall, consumers will spend more money on new vehicles than any month in April on record,” said Thomas King, president of the data and analysis from JD Power.
The average interest rate on new auto loans in April is expected to rise 46 basis points to 4.3% from a year ago, on track for the first year-to-year increase. the other since July 2019.
“The sustained pace of sales, despite lower discounts and more expensive vehicle purchases, is in part due to extremely high used vehicle prices,” King said. “Even though interest rates are slightly higher, the average monthly payment is $ 593, up just $ 2, with an average trade-in value rising to $ 5,502, an increase of 3,087 $ compared to a year ago. ”
From Dec.31 to April 30, used car prices rose 32% at wholesale and 10% at retail, said Jonathan Banks, vice president of valuation services at JD Power.
“The used vehicle market continues to be hot and prices remain at record levels,” Banks said. “This will not change for the foreseeable future.”