In addition to pent-up retail demand, the automotive industry is set to experience a surge in June deliveries due to a rise in fleet sales. Car manufacturers now have ample inventory to cater to commercial and government sectors instead of solely focusing on retail customers, further driving this trend.
J.D. Power predicts that fleet sales in June will increase by 55 percent compared to the previous year. As a result, fleet volume is expected to account for 20 percent of total light-vehicle sales, rising from 16 percent in June 2022.
Meanwhile, Cox Automotive forecasts a significant increase in full-year fleet sales, estimating a rise from 1.8 million vehicles in 2022 to 2.6 million in the current year.
According to industry experts, manufacturers are capitalizing on higher vehicle production rates to allocate a greater number of vehicles to fleet customers, leading to the accelerated growth in sales to this segment.
Incentives have also witnessed a steady increase from the previous lows. J.D. Power-GlobalData reports that discounts in June remained consistent compared to May levels but have significantly risen compared to last year.
The average incentive spend per vehicle has soared by 96 percent since June 2022, currently reaching $1,798. In terms of percentage of manufacturer’s suggested retail price (MSRP), incentive spending presently stands at 3.7 percent, which marks a 1.7 percentage point increase from June 2022, as per J.D. Power-GlobalData.
Moreover, J.D. Power-GlobalData highlights the upward trend in discounts on leased vehicles in recent months. The report expects leasing to account for 21 percent of retail sales in June, a notable increase from the low point of 16 percent recorded in September 2022.
The industry attributes the rise in monthly payments to a combination of elevated transaction prices and high interest rates. Explaining further, King adds, “The average monthly finance payment in June is expected to reach $726, marking a $27 increase from June 2022. This translates to a 3.9 percent rise in monthly payments compared to the previous year. Additionally, the average interest rate for new-vehicle loans is anticipated to be 7 percent, reflecting a significant increase of 194 basis points from last year.”
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
