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Consumers look for Labor Day price breaks to offset inflation, high interest rates.

Will Labor Day Markdowns Spur New Vehicle Sales?

The answer seems to be yes, but dealers have to work to win them.

Many dealers, from CarFax to the mom-and-pop store on the corner, are announcing Labor Day sales to attract the annual stampede of buyers that traditionally accompanies the unofficial end of summer.

Price cuts are likely to boost buyers' interest, though likely not as much as in pre-pandemic years.

“If dealers are willing to sell the cars for a little less, if they’re willing to be that much more aggressive on pricing, I think there will be rewards,” Karl Brauer, executive analyst, iSeeCars, tells Wards. “I think a lot of dealers are still trying to sell at the prices they got a year ago or six months ago.”

That’s a problem. New-car sales have slowed 25% from a year ago, according to a recent iSeeCars study. Interest rates, inflation and lender skittishness about auto loans have all added to the slowdown. But Brauer thinks the main stumbling block dealers must overcome to sell more new cars is the high prices some still charge.

“I think what you’re seeing is the pricing market adjust to demand,” says Brauer. “Demand has dropped, and so pricing has dropped (in many areas). It hasn’t dropped dramatically…but both of them have come down off the highs we saw. We’re getting back to normal car production, so demand is slightly different.”

Although new-car sales have slowed, Brauer says they’ve maintained a consistent pace thanks partly to incentives and deals. Consumers see those price adjustments, which spurs many to satisfy their new-vehicle desires they put on hold when prices were at all-time highs.

From spring to Labor Day is prime new car selling time, so dealers should work to sell as many as possible.

The most recent biweekly Market Report by Jonathan Smoke, chief economist for Cox Automotive, notes high employment, lower unleaded gas prices (down 1.2% week-over-week) and more manufacturers’ incentives are positives for new-car dealers seeking sales. The pain points for consumers are variations on payroll recovery among states, consumer overspending on credit and debit cards and a year-over-year increase in unemployment benefits, though they are gradually decreasing.

“Despite consumers feeling less confident, we continue to see strength in spending…and we see strength in U.S. vehicle retail,” Smoke says. “For the U.S. vehicle buyer, rates are still better than they were in March, and prices are now lower. The momentum, though, may not last very much longer if wholesale prices keep going up as we’ve seen in the last week.”

If prices move higher in September – due to any number of factors, including a possible strike by the UAW  – the market may be heading toward what Smoke says is “a back-and-forth cycle of up-and-down prices with supply tight in the vehicle market.”



TAGS: Retail
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