Memorial Day Deals Likely Offset by Incentives, Leasing
Expect rise in sales volume but sinking profits, reports J.D. Power.
When dealers tally their May sales after Memorial Day, they may see an increase in retail and non-retail transactions, including F&I products.
But Thomas King, president of J.D. Power's data and analytics division, says it may “represent a mixed bag of outcomes.
“On the positive side, the total sales pace will exceed 16 million units for the first time this year. Also, discounts are similar to last month, despite May being a month in which discounts traditionally increase to take advantage of elevated shopping activity during the Memorial Day weekend.”
Here’s the math: A recent J.D. Power report estimates the seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to total 16.1 million units, up 500,000 million from May 2023.
This month has 26 selling days, one more than in 2023. Comparing the sales volume without adjusting for the number of selling days equals a 7% increase from May 2023.
The downside, King says, is the rise of inventories on many dealers’ lots and the likelihood of increased discounts as the first summer holiday begins. Although discounts align with those from April 2024 ($33 per unit), they have increased from May 2023, he says.
King confirms our previously reported news that the average new-vehicle retail transaction price is declining compared with a year ago. Rising incentives and increased leasing are among the factors that have tanked retail profit margins.
This report comes as Ford instructs dealers to pause EV investments, and Nissan asks dealers to slash prices and reportedly offers them incentives to accept more inventory.
“Rising inventory means fewer vehicles are being presold by retailers, with more shoppers able to buy directly off dealer lots. This month, J.D. Power forecasts that 33.3% of vehicles will sell within 10 days of arriving at the dealership, down from a peak of 58% in March 2022, says King. “The average time a new vehicle remains in the dealer’s possession before sale is expected to be 40 days, up from 29 days a year ago.”
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