Aug. car sales to get boost thanks to Labor Day weekend

New car sales are projected to rise over last year this August thanks to stronger seasonal demand and an end-of-month boost driven by Labor Day deals.

Driving the news: All signs indicate August will be one of the year’s best-performing months in terms of sales volume. Fueling this activity is a jump in manufacturer incentives, up nearly 60% from last year, and an ongoing rebound from late June’s CDK Global outage.

• J.D. Power projects a seasonally adjusted new vehicle sales total of roughly 1.44 million, up 4.2% from last year. Retail sales are stronger this time around as well, set to hit 1.21 million, an increase of 6.8%.

• Cox Automotive is forecasting an annual sales pace (SAAR) of 15.4 million, slightly better than last year but down from July’s rate of 15.8 million.

Zooming in: While higher demand is good news for the industry, some factors are moving against dealers, as they have for most of 2024.

• At 1.7 million units, inventory is up roughly 4.2% from July, although last month’s supply was difficult to gauge due to the abnormal circumstances.

• That increase in inventory combined with automaker incentives has dragged average new vehicle transaction prices down about 4.1% to $44,039, according to J.D. Power.

• While lower prices are driving sales volumes higher, the decline in value is eating into retailer profits. Dealerships are expected to earn around 26% less on average than they did last year.

Bottom line: Overall, the industry’s performance this month has been strong, although challenges still remain. That being said, it’s possible we’ll see even better months as we near 2025. Not only are the holidays approaching, but the Federal Reserve seems poised to introduce its first interest rate cut in more than four years. Should that happen, demand could rise even faster. How long it takes for those adjustments to take effect remains to be seen.

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