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Auto Sales Slide Expected to Continue in Fourth Straight Month

Both Edmunds and J.D. Power predict dismal new-vehicle sales in July as the month nears end. Edmunds forecasts that 1.42 million new cars and trucks will be sold in the U.S. in July for an estimated seasonally adjusted annual rate (SAAR) of 16.9 million. This reflects a 3.1 percent decrease in sales from June 2017 and a 6.2 percent decrease from July 2016.

“July is historically a strong month, but with disappointing sales and inventories still building, something needs to give,” said Jessica Caldwell, Edmunds executive director of industry analysis. “A lot is riding on late-summer sales events to help move vehicles before 2018 models start arriving at dealer lots. Production slowdowns will help address some of the inventory issues, but consumers may be waiting for automakers to loosen the purse strings on incentives to get them to pull the trigger on making a purchase.”

Comparatively, J.D. Power and LMC Automotive together predict 1.24 million new-vehicle sales in July-a 1.7-percent decrease compared with July 2016-and a seasonally adjusted annualized rate (SAAR) of 14.1 million units, a decrease of 600,000 units from a year ago.

“While the retail selling rate will post declines again in July, the larger concern remains the continued deterioration of key industry health indicators,” said Thomas King, vice president of PIN OEM operations, media & marketing at J.D. Power. “Manufacturers typically reduce incentive spending following the July 4 holiday, but this year elevated inventory levels, coupled with the sales slowdown, have compelled them to maintain aggressive discounts throughout July.”

Last year, industry incentive spending fell by 14 percent after the July 4 holiday. In contrast, this year spending has remained at holiday levels throughout the month. Average incentive spending per unit to date in July is $3,876 per unit, a record for the month, surpassing the previous high for the month of $3,597, set in July 2016.

The elevated inventory levels are reflected in slower turn rates for vehicles sitting on dealer lots. Despite record discounts, the average new-vehicle sold in July spent 72 days in inventory, the highest level since 2009.

Furthermore, the utilization of extended loan terms continues to grow. Loans of 84 months and longer are accounting for more than 6 percent of retail sales for the first time ever.

“The second half of the year,” King said, “will continue to present challenges to manufacturers as they navigate a hyper competitive and dynamic marketplace, while working to find the optimal mix of production cuts and discounting necessary to align supply, demand and inventory levels.”

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