Fleet Sales Boost Light New Vehicle Sales

The light new-vehicle sales pace increased in January to 15.7 million, while new vehicle prices declined slightly, and incentives increased.

Fleet sales are bolstering increases in light new vehicle sales, finds Cox Automotive’s Market Report for Feb. 6.

The light new-vehicle sales pace increased in January to 15.7 million, while new vehicle prices declined slightly, and incentives increased.

Normally automotive light vehicle sales see a 25-30% decline in January. The sales pace for January 2023 was 15.7 million, up from last year’s 15.1 million and 17.7% from December’s 13.4 million.

Most sales in January came from the fleet side. Combined sales into large rental, commercial, and government fleets rose 58% from January 2022. Sales into large rental fleets increased 96% year over year, while sales into commercial fleets were up 31%, and sales into government fleets were up 65%.

Total light vehicle sales rose 4.2% in January from 2022, with the same number of selling days.  

The remaining retail sales were estimated to be up 0.3%, leading to an estimated retail seasonally adjusted annual rate (SAAR) of 13.2 million. This figure is down 0.2 million from 2022, but up 1.7 million from December. At 16.5%, the fleet market share is estimated to have gained 3.3% market share compared to January 2022’s share of 13.2%. This represents a 2.3% share gain compared to December’s 14.2% market share.

Cox reports preliminary data shows the average transaction price of a new vehicle in January exceeded the average manufacturer’s suggested retail price (MSRP) again. However, the average price declined 0.8% but was still up 5.8% from a year ago. The average MSRP fell 0.9% in January from December and was up 7.3% from a year ago.  

Manufacturers spent an average of $1,386 per vehicle in January, Cox reports. This figure is up 4.8%. Incentives as a percentage of average transaction price increased to 2.8%.

Job growth and unemployment declines, from 3.5% to 3.4%, marking a 54-year low in unemployment in the U.S., should keep the automotive market strong.

But increases to the prime rate may limit consumer’s buying power. The Federal Reserve raised rates by a quarter point, with auto loan rates moving higher in January ahead of that increase. The Fed Funds Rate is now in the 4.50% to 4.75% range, which is the highest since 2007.

The Federal Reserve plans more interest rate hikes in the months to come and the strong labor market may create a need for more increases. These rate increases will likely be in quarter-point increments in March and again in May. Such moves would bring the terminal Fed Funds Rate to 5-5.25%.  

Originally posted on Auto Dealer Today