U.S. auto sales in December will likely improve by 4% year-over-year to 1.27 million, according to a forecasted analysis conducted by Cox Automotive. However, these results will probably fall short of the typical 1.5 million units sold in December, when automakers drive their year-end marketing campaigns. Total sales for 2022 were likely below 14 million units, the lowest since 2011.
“This December, there were fewer giant red bows than dealers would have liked,” said Charles Chesbrough, senior economist at Cox Automotive, in a press release. “Given the large improvement in supply levels, it seems likely that rising interest rates are now constraining demand in the retail auto market. With record-high prices and elevated loan rates, the pool of potential new-vehicle buyers is shrinking.”
The onset of COVID-19, followed by years of semiconductor shortages and supply bottlenecks, has kept inventories low and vehicle production to a minimum. This year, as factories kick their production into high gear, automakers could have to lower their costs to entice buyers.
A joint forecast from LMC Automotive and J.D. Power found that the average new car transaction price in December will likely reach $46,382, a 2.5% increase from December 2021 and a new monthly high. Average incentive spending per unit in December is also expected to decline to $1,187 from $1,511 a year ago.
These conditions are also driving up the number of auto loan defaults. A November report from TransUnion found that 1.65% of loans in the third quarter were at least 60 days delinquent.
Meanwhile, used car prices are falling, which impacts trade-in values that many consumers use to offset the cost of a new car.