CARY, N.C. -

With the month’s end in sight, experts from Cox Automotive, J.D. Power and TrueCar shared their expectations for August used-vehicle and new-model sales as well as how wholesale prices and residual values are trending.

Beginning first with TrueCar’s used-vehicle sales forecast, analysts project dealers retailing 3.7 million units in August. While that’s roughly the same amount as July, the prediction represents a 6% lift from a year ago.

The projected rebound would reverse what the industry produced in July.

According to Cox Automotive estimates, total used-vehicle sales decreased 18% year over year in July. Analysts determined the seasonally adjusted annual rate (SAAR) of sales declined to 36.9 million, down significantly from 44.8 million last July, which they called “a strong used-vehicle sales month, the early days of the initial pandemic recovery.

Cox Automotive noted the July used SAAR also was down compared to 39.0 million in June.

Total used-vehicle sales volume last month was estimated at 3.1 million, down from 3.2 million in June, Cox Automotive added in an online Data Point.

What dealers are having to pay to obtain that used inventory continues to be a challenge that’s been intensified with potential buyers looking to the used department to satisfy their vehicle wishes because of low new-model selection. Jonathan Banks, vice president of valuations services at J.D. Power, addressed that part of the automotive landscape.

“In August, used vehicles continue to help fill the gaps on dealer lots left by low levels of new inventory. In the wholesale marketplace, dealers are competing fiercely for a finite amount of available used units which is ultimately helping keep wholesale prices near record levels,” Banks said.

“So far in August, wholesale prices for units up to eight years in age have been flat to up slightly, while overall wholesale sales are trending nearly 29% lower than during August 2019,” he continued.

“We still expect wholesale prices to gradually cool as the market moves into the fall, however, a certain degree of volatility should be expected as the industry continues to work through supply-related challenges,” Banks went on to say.

Continuing the used-vehicle conversation was Eric Lyman, who is senior vice president of ALG. Lyman tied together his latest observations on residual values with what’s happening on dealer blacktops nowadays.

“The recent cooling in the used market is more than just end of summer seasonality, it signals the start of an extended gradual decline in vehicle values that will play out over the next 18 months and bring residual values closer to pre-pandemic levels,” Lyman said.

“Fortunately, pent up demand, fewer late model year vehicles in the used supply chain and sustained, but tempered, economic recovery will result in residual values that will continue to be above historical norms,” he continued.

“ALG’s current full-year residual outlook for 2021 model-year vehicles returning in 2024 calendar year is 50.6% of MSRP. This is about one percentage point above the pre-pandemic average of 49.7% of actual 3-year-old retention from 2015-2019,” Lyman went on to say.

New-vehicle inventory insights

Thomas King, president of the data and analytics division at J.D. Power, said franchised dealers currently have about the same number of new vehicles on their lots in August as they did in July. King pegged the figure at approximately 942,000 vehicles in inventory available for retail sale, compared with roughly 3.0 million in inventory two years ago.

“Although inventory is arriving at dealers daily, it is simply replacing the vehicles being sold, preventing dealers from increasing inventories to a level necessary to support a higher sales pace. This means the sales pace is being dictated by production levels rather than actual consumer demand,” King said.

When new models are delivered to franchised dealers, J.D. Power pointed out that they sell quickly.

This month, J.D. Power indicated more than 49% of new vehicles will be sold within 10 days of arriving at a dealership, up from 47% in July and up from only 26% in August 2019.

J.D. Power also pointed out that the average number of days a new vehicle sits on a dealer lot before being sold is on pace to fall to a record low of 26 days, the first time on record below 30 days. That’s down from 62 days a year ago, and down four days from July.

King closed his thoughts by looking toward next month that starts with the traditional retail buzz during Labor Day weekend.

“Looking forward to September, the dynamics observed in August are expected to continue with sales being constrained by available inventory,” King said. “The key question is the extent to which manufacturers can produce enough vehicles to increase — rather than maintain — inventory levels.

“Ongoing supply chain issues and recent announcements of further production cuts by several manufacturers mean that the aggregate inventory situation is unlikely to meaningfully improve in September,” he continued. “In some instances, it will deteriorate. It also means that prices and per-unit profitability will remain strong.

“Shoppers accustomed to Labor Day promotional events with large discounts on outgoing model-year vehicles will likely be disappointed by the lack of discounts and choice of vehicles. But as August demonstrates, there are plenty of shoppers willing and able to buy at higher prices with less choice,” King went on to say.

New-model sales expectations

With the inventory situation being what it is, TrueCar predicted total new-vehicle sales will reach 1,212,399 units in August, down 4% from a year ago but up 1% versus July, when adjusted for the same number of selling days.

According to TrueCar, this month’s seasonally adjusted annualized rate (SAAR) for total light vehicle sales is an estimated 14.4 million, down 4% from August 2020.

Excluding fleet sales, TrueCar is predicting U.S. retail deliveries of new cars and light trucks to be 1,077,701 units, down 7% from a year ago and about even with July.

“The chip shortage continues to be the driving force behind vehicle availability, creating the lowest average incentive spending since 2013,” TrueCar lead industry analyst Nick Woolard said. “Continued strong demand is creating an environment where vehicles are selling extremely quickly. About a third of vehicles are selling within a week of arriving on the dealer lot, compared to just 18% last year.”

Valeri Tompkins, senior vice president of OEM solutions at TrueCar, added these thoughts.

“Though new-vehicle sales continue to decline in August, some brands saw a year-over-year increase in sales. Toyota is operating extremely well considering their inventory days’ supply is roughly half the industry average,” Tompkins said.

“We will continue to see how they perform once their announced plant closures put additional pressure on production and inventory,” she went on to say.

Cox Automotive is projecting new-car sales volume to finish near 1.20 million, down 9% from last August, which had one additional selling day, and down nearly 7% from last month.

Cox Automotive noted that August’s finish would be the fourth consecutive monthly decline of 500,000 units or more since April’s post-pandemic peak pace of 18.3 million.

The supply situation will likely worsen over the coming weeks, according to Cox Automotive senior economist Charlie Chesbrough.

“Available inventory on dealer lots has been falling for months, and sales have been constrained further and further as a result. And soon the market will enter the Labor Day holiday weekend, usually one of the highest sales periods of the entire year, but with half the supply they had last year,” Chesbrough said.