Pub. 1 Issue 3

37 An Analysis of Second Quarter BY Patrick Manzi F ollowing is an analysis of U.S. auto sales and the economy following the end of the second quarter in 2019, recently issued by the National Automobile Dealers Association (NADA): What happened in June 2019? Manzi: June sales nished up at a SAAR of 17 million units, which represents roughly a 1-2 percent decrease from June of last year. is is the third month this year with a SAAR of 17 million units or more. Light trucks accounted for more than 70 percent of all new vehicles sold. What happened in the rst two quarters of 2019? Manzi: Sales have declined relative to 2018 each month this year, but overall, not more than we expected. Transaction prices on both cars and light trucks continued to rise and set new records. According to the latest NADA Average Dealership Financial Profile Series from April 2019, the average new-vehicle transaction price was $36,642, up 3.3 percent compared to this time last year. Transaction prices on used vehicles sold by franchised dealers have also risen. The average used-vehicle transaction price in April was $20,979, up 3.8 per- cent compared to this time last year. The average monthly payment gap between new and used vehicles continues to increase, which will likely result in more consumers shifting to the used market. Incentive spending fell in April but picked back up in May. Compared to last year, average incentive levels were lower each month this year except for May. According to J.D. Power, average incentive spending in May was $3,816 per vehicle, an increase of $12 com- pared to last year. If inventory levels get too high, we will see incentive spending pick up to help clear out dealer lots. What are some key trends for the rest of the year and potential head- winds and tailwinds? Manzi: We expect that off-lease vehi- cle returns will peak over the summer months and will total more than four million units this year. Off-lease inven- tories will remain robust over the next few years due to high leasing penetra- tions over the past few years. As prices continue to climb on the new vehicle side for both loans and leases, more and more consumers will shift to the used vehicle market. Low vehicle sales during the Great Recession have result- ed in supply constraints of older and lower-priced vehicles, which will cause prices at the lower end of the spectrum to remain elevated in the near term. The Fed has signaled that we will not see any interest rate increases in 2019 and some believe that we may even see an interest rate cut of 25 basis points 2019 AutoSales