New-vehicle retail sales for June 2022 are expected to decline when compared with June 2021, according to a joint forecast from J.D. Power and LMC Automotive. Retail sales of new vehicles this month are expected to reach 965,300 units, a 18.2% decrease compared with June 2021 when adjusted for selling days. New-vehicle retail sales in Q2 2022 are projected to reach 2.9 million units, a 23.3% decrease from Q2 2021 when adjusted for selling days.

New-vehicle retail sales for the first six months of 2022 are projected to reach 5.8 million units, a 19.1% decrease from the first six months of 2021 when adjusted for selling days. The first half of 2021 was an all-time record for retail sales.

The Total Sales Forecast

Total new-vehicle sales for June 2022, including retail and non-retail transactions, are projected to reach 1.3 million units, a 15.8% decrease from June 2021. Comparing the sales volume without adjusting for the number of selling days translates to a decrease of 12.4% from 2021.

The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 13.1 million units, down 2.3 million units from 2021.

New-vehicle total sales in Q2 2022 are projected to reach around 3.5 million units, a 20.5% decrease from Q2 2021 when adjusted for selling days.

New-vehicle total sales for the first half of 2022 are projected to reach 6.8 million units, an 18.7% decrease from the first half of 2021 when adjusted for selling days.

The Takeaways

Thomas King, president of the data and analytics division at J.D. Power, offered the following analysis on new vehicle pricing:

“The 2022 theme we have seen of sales quality over sales quantity is continuing in June. On a volume basis, June year-to-date retail sales will be just under 5.9 million units, a large decline of 19.1%. Excluding pandemic-affected 2020, this is the worst first six months’ sales volume performance since 2011. However, from a profitability standpoint, the first half of 2022 has set records for both retailers and manufacturers as vehicle prices continue to rise, manufacturer discounts get ever smaller and retailer margins set new highs.

“The inventory shortages that have depressed volumes, however, driven up prices and profits, are showing no signs of improvement. June 2022 is on track to be the eighth consecutive month that retail inventory closes below 900,000 units.

“For June, new-vehicle prices continue to set records, with the average transaction price expected to reach $45,844—a 14.5% increase from a year ago and the highest level on record. Consequently, even though the sales pace is down 18.2% year over year, consumers will spend $44.3 billion on new vehicles this month, the second-highest level ever for the month of June but slightly down 2.7% from June 2021 due to reduced volume.

“Average interest rates for new vehicle loans continue to accelerate and are expected to increase 74 basis points from a year ago to 5.01% in June.

“However, elevated used-vehicle values continue to help affordability for new-vehicle buyers who have a vehicle to trade in. The average trade-in equity for June is trending towards a record high of $10,381, a 49.2% increase from a year ago and the first time above $10,000.

“Despite record-level trade-in values, the average monthly finance payment in June is on pace to hit a record high of $698, up $79 from June 2021. That translates to a 12.8% increase in monthly payments from a year ago, which is just below the 14.5% increase in transaction prices.

“Even at these record pricing levels, vehicles continue to sell quickly and a significant number of vehicles are being ordered—or purchased—by buyers before they arrive at the dealership. This month, 56% of vehicles will be sold within 10 days of arriving at a dealership, while the average number of days a new vehicle is in a dealer’s possession before being sold is on pace to be 19 days—down from 37 days a year ago.

“Looking forward, while higher interest rates and economic concerns represent directional headwinds for the industry, consumer demand remains considerably higher than the available supply. With each additional month of inventory constraints, pent-up demand for new vehicles is building ever larger—and that demand will insulate the industry from the effects of these economic headwinds. As new-vehicle availability eventually improves, some softening of the current record per-unit pricing and profitability may occur but will be mitigated by a return to higher monthly sales volumes.”