A slight drop in August sales matches predictions that the market will continue to slow down this fall. Sales were off slightly from year ago levels, dipping 0.2 percent as the shift away from cars to trucks intensifies. Car volume fell 19 percent during the month and overall share for these traditional passenger vehicles dropped to 28.9 percent of the market, while trucks soared to a new high of 68 percent of all sales.
“For the first time in U.S. automotive history, monthly car share is on pace to dip below 30 percent,” said Zo Rahm, research manager for Cox Automotive, the parent company of Kelley Blue Book. “This is a dramatic shift — car share was near 50 percent just 5 years ago. With the drop, it’s tough to forecast where share will finally level out, as consumers have decidedly killed the car. Our initial idea of the floor being somewhere in the low-30-percent neighborhood appears to be too high in a market that loves its trucks and SUVs.”
The preference for trucks is evidence in the month’s sales winners, who were mostly buoyed by strong demand for crossovers, SUVs and trucks. Fiat Chrysler Automotive saw a 10-percent increase in sales for the month, fueled by a 27-percent jump at Ram and a 20-percent increase at Jeep. Both those strong performances are attributed to the new 2019 Ram 1500 reaching the market in volume and the continued strength of the redesigned 2018 Jeep Wrangler.
American Honda sales grew by 1.3 percent because of a 15-percent gain at Acura, which in turn is attributed to a 31 percent boost in truck sales because of the new 2019 RDX compact crossover. Honda division sales were more or less flat for the month. Land Rover also is prospering in the truck boom notching a 14 percent increase in sales during the month and Ford was up 4.1 percent, also due to consumer preference for trucks. Ford has previously announced that it is exiting the traditional sedan market and will have only the Mustang coupe as its sole car offering.
While sales are softening, incentives haven’t really taken off because car makers have been reining in production and keeping inventories in check. General Motors, which has opted to report sales quarterly instead of monthly, is estimated to have seen a 13-percent decline for the month due to its less generous offers.
According to J.D. Power, per vehicle incentives were reported to be down $141 during August over year ago levels, averaging $3,744. Still, manufacturers have been able to move the iron. The research firm said the average time a new vehicle sits on the lot was 66 days in early August, down four days from a year earlier.
Small SUV prices soften
While trucks continue to dominate sales, there appears to be a bit of softening in one segment, small SUVs, according to data from Kelley Blue Book. Even as transaction prices continue to climb, going up an average of $643 in August over the previous year to $35,541, one of the segments to see average prices decline is small SUVs. However, that may be due in part from a new generation of entry level crossovers like the 2019 Nissan Kicks and 2018 Hyundai Kona hitting the market in a segment that was heavy with luxury versions.
“Average transaction prices are up for the industry, as most manufacturers reported gains from the sales continue to shift from cars to SUVs,” said Tim Fleming, analyst for Kelley Blue Book. “However, despite the nearly 20 percent sales growth for compact and subcompact SUV segments this year, prices in these segments flatten or even slightly decline in August. It’s likely a reflection of today’s extremely competitive landscape and the abundance of new models available. Moving forward, the industry could see further discounts and incentives in these utility segments as automakers continue to focus their attention on placing their products at the top of consumers’ consideration lists.”
American Honda saw average transaction prices climb 4 percent from a 4-percent gain in Accord prices and an 11-percent jump for the new 2019 Acura RDX. GM saw a similar 4-percent increase in prices driven by Chevrolet’s 5-percent jump in ATP. The 2019 Traverse was a factor with a 13-percent bump in prices.
While subcompact crossover prices dropped 0.6 percent to $23,902 on average year-over-year, transaction prices were up for minivans (5.1 percent), luxury compact SUVs (3.8 percent) and midsize pickups (3.1 percent).
0-percent financing wanes
Rolled out in the wake of the 9/11 attacks in 2001 to keep the economy moving, 0-percent financing may finally have run its course as an incentive tool for manufacturers because of rising interest rates. Automotive News reports that the offers are beginning to disappear.
Over the past 18 months, the Federal Reserve has raised the prime lending rate five times, two times this year alone. Dean Case, chief marketing officer for Hyundai, told the trade paper that “Every day that the Fed raises [rates] a quarter, we look around and go, ‘Was that it for the 0? Are we going to now have to go to 0.9?’”
Higher interest rates can add up. According to Charlie Chesbrough, senior economist at Cox Automotive, a 1-percent increase in the rate on a $30,000 vehicle can cost a manufacturer $800 on a subsidized loan. According to Bankrate.com, current interest rates stand at 4.76 percent on 5-year loans, 4.70 for 4 years, and 5.29 percent for 3-year used car loan.
Mini offers low-cost Oxford Edition
Aimed primarily at college students returning to school and recent grads who may be getting their first jobs, the 2019 Mini Oxford Edition is a well-equipped entry level car that comes with $6,900 of optional equipment as standard. The company says these limited-edition models will be made available to any current full- or part-time students of any 2- or 4-year accredited college or university as well as those enrolled in post-graduate schools and recent graduates who are within 12 months of matriculation.
The Mini Oxford Edition has an MSRP of $19,750 for the 2-door and $20,750 for the 4-door, plus $850 destination. Among the upgraded equipment made standard are 17-inch wheels in silver or black, a choice of automatic or manual transmission, dual-pane panoramic moonroof, heated seats and a choice of six exterior colors.
The rundown
Considering the donation of your old car to charity? If you use the new donate option here at Kelley Blue Book through Sept. 30, we’ll give an extra $100 to St. Jude’s Hospital. Details here.
Compact cars may be down, but they are not out and continue to offer a lot of value for price as we discover in the redesigned 2019 Kia Forte. We get behind the wheel in this First Review.
Further up the compact car pecking order, the 2019 Acura ILX luxury model has gotten a facelift for the new model year. The AcuraWatch safety system is now standard on all models.
In the market for a new car? Explore these useful tips on how to get the best deal:
Kelley Blue Book’s Complete Guide to Incentives
All you need to know about leasing
