How inventory and incentives are affecting the summer sales outlook

Author

Colin Velez
June 14, 2024

The return of incentives, recovering supply and pent-up demand are expected to drive strong sales throughout this summer, even though consumers are adopting new preferences due to affordability challenges, according to Cars Commerce’s Industry Insights Report.

Why this matters: After a rocky start to the year punctuated by high interest rates and affordability concerns, the retail automotive sector is overdue for a period of stability. However, while trends suggest the market will continue to normalize throughout the coming months, some challenges are likely to persist well into the future.

Key takeaways

  • New vehicle supply has drastically improved, rising roughly 40% year-over-year in May, while prices declined 1.6%. However, demand for new cars, measured through the number of searches on Cars Commerce’s platform, dropped 16.7%.

  • Used vehicle supply remains constrained, rising only 1% from 2023. Pre-owned car prices declined 7.2% while demand fell 6.3%.

  • Refreshes of older models are currently in high demand throughout the car market, with redesigned SUVs taking up more than half the spots on the list of top sellers.

  • While buyers are heavily focused on affordability, a majority (53%) still plan on purchasing a new vehicle, compared to the 26% who intend to shop used.

Shifts in buying habits

Impact of rates: High interest rates and prices are driving changes in consumer shopping habits. More than half (56%) of all car buyers surveyed by Cars Commerce said they were re-evaluating their plans to purchase a vehicle because of unaffordable rates, with millennials being the most likely to hesitate. 

Budget increase: Buyers have also adjusted to the lack of affordability in the current market by increasing their budgets. Fifty-seven percent of shoppers plan to spend more than $30,000 on their next vehicle, while only 21% are looking for options under $20,000.

Local vs. digital: While the majority of car buyers plan on purchasing from a local dealership, a notable minority (25%) expressed interest in shopping exclusively online. However, the data continues to underline the fact that consumers go where inventory is available, making it important to track model demand.

Bottom line: Overall, trends indicate the coming months will be strong in terms of sales. However, dealers will need to pay close attention to their local markets to ensure they can sufficiently meet demand.

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