If your dealership or finance company improved in the used-vehicle department in July compared to the previous month, you were part of the sequential improvement TrueCar predicted.

Just before the weekend and close of the month, TrueCar projected that July used-vehicle sales would reach 3 million. While that figure is down 17% from a year ago, TrueCar pointed out through a news release that its forecast represented a 4% lift from June.

A couple of financing trends to mention, TrueCar projected the average interest rate on used vehicles turned in July would be 8.5% with contract terms stretching an extra month compared to last year at 71 months.

Thomas King, president of the data and analytics division at J.D. Power, mentioned another interesting statistic associated with the used-vehicle department for July.

In another news release, King said the average trade-in equity new-vehicle buyers are bringing to their next purchase for July is trending to maintain a near record high level of $10,083, a 37.4% increase from a year ago and the second consecutive month above $10,000.

Furthermore, that same release contained residual value perspectives from ALG vice president Eric Lyman.

“ALG forecasts that new 2022 model-year vehicles will retain 82% of MSRP in calendar year 2023, which is a staggering 18 percentage points higher than the five years prior to the pandemic,” Lyman said. “This is due not only to the rise in new- and used-vehicle prices, but also to the drop in used supply associated with daily rental fleet units.

“By calendar year 2027, much of these gains will subside as pent-up demand is satisfied and new and used vehicle inventories rise, leading to declines in overall used market values,” he added.

New-vehicle sales projections & more

TrueCar expects total new-vehicle industry sales to reach 1,119,712 units in July, which would be down 10% from a year ago and down 2% from June, when adjusted for the same number of selling days.

TrueCar said July’s seasonally adjusted annualized rate (SAAR) for total light vehicle industry sales is an estimated 13 million, down 15% from July of last year.

Excluding fleet sales, TrueCar expects U.S. retail deliveries of new cars and light trucks to be 975,597 units, down 14% from a year ago and down 1% from June 2022.

“This month we’re seeing the first response from the industry to address affordability concerns, by increasing incentives for the first time in nearly 20 months,” TrueCar industry analyst Zack Krelle said in a news release. “Even before the latest bump in federal interest rates, consumers were facing rising challenges to vehicle affordability. As rates go up, consumers are faced with increased monthly payments, even as average transaction prices remain flat.”

And while inventory remains close to historically low levels, TrueCar noted there is some emerging distinction between these levels among various OEMs.

“OEMs that have inventory and supply are weathering the drop in sales differently than the ones that don’t,” TrueCar vice president of OEM solutions Justin Colon said. “There may be long term implications for brands that are low on inventory, as those brands could lose some loyal customers.”

According to the Cox Automotive forecast released, the seasonally adjusted rate (SAAR) of new-vehicle sales in July is expected to rise slightly to 13.2 million, up from previous month’s 13.0 million pace but fall well below last year’s 14.7 million level.

Cox Automotive said the sales volume in July is forecast to finish near 1.12 million units, down 13% from last year’s volume of 1.29 million and lower by 2% from June. With 26 selling days in July, the same as the previous month and one less than last year, the volume decline is mainly attributed to the continued lack of available product.

“As we move into the second half of 2022, there are plenty of headwinds pushing against a notable recovery in sales volumes,” Cox Automotive senior economist Charlie Chesbrough said in another news release. “Rising interest rates and low consumer sentiment are keeping many potential buyers out of the market.

“At the same time, higher prices for both gasoline and vehicles are making affordability an even greater challenge. Tight supply, however, continues to be the biggest obstacle over the near term, and there is little evidence of supply returning to normal,” Chesbrough continued.

Furthermore, King from J.D. Power added these thoughts about the new-vehicle market.

“July is yet another month where supply constraints keep vehicle sales artificially low but deliver record transaction prices and dealer profitability,” King said. “July 2022 is on track to be the ninth consecutive month that retail inventory closes below 900,000 units as anticipated improvements in vehicle production volumes fail to materialize. The industry sales pace is simply a function of the number of vehicles being delivered to dealers each month, with a large portion of those vehicles being sold before they arrive at the dealership.

“Unsurprisingly, the lack of inventory is leading to even smaller discounts from manufacturers. The average incentive spend per vehicle is tracking toward $894, a decrease of 54.7% from a year ago. This will mark the third consecutive month under $1,000 and the first time under $900,” King continued.

And as he often does, King looked beyond the current sales month to offer a glimpse of what could unfold in August and the remainder of the year.

“In August, the overall industry sales pace will continue to be constrained by procurement, production and distribution challenges,” King said. “Consumer demand remains markedly higher than supply, all of which points to a continuation of the current marketplace dynamics of depressed sales volumes but record pricing and profitability.

“Longer term, the inevitable increase in production levels, coupled with higher interest rates and weakening economic conditions will likely lead to a rebalancing of the current volume/price dynamic,” he continued. “That said, the significant levels of pent-up demand for new vehicles mean the industry is generally well positioned to continue delivering strong financial results, despite the fact economic conditions and rising interest rates will cause some potential buyers to defer new-vehicle purchases.”