U.S. auto sales showed surprising strength in March, thanks in part to sales to rental companies and other businesses and ongoing demand for vehicles despite rising interest rates and auto prices.
March’s seasonally adjusted annual rate, or SAAR, was 14.8 million vehicles, Cox Automotive said this week. That’s down from 16 million in January and 15 million in February, Cox said.
Quarterly sales results for General Motors Co. GM and Ford Motor Co. F were lifted by truck and SUV sales. For Tesla Inc. TSLA, price cuts drove higher quarterly sales as well.
The first-quarter sales pace of 15.3 million vehicles, however, was “well ahead” of the 14.1 million SAAR in the first quarter of last year, and the best quarterly SAAR since the second quarter of 2021, Cox said, pinning it on higher inventory levels and improved fleet sales.
A year ago, auto makers had little inventory and put emphasis on retail sales, which are more profitable, Cox analyst Michelle Krebs said. “Fleet sales were next to nothing,” she said.
As inventories ticked higher, albeit at still historically lower levels, auto makers “pulled the lever on fleet sales,” selling to car-rental companies, businesses and, to a lesser extent, the government, she said.
Also surprising was “how resilient the consumer has been,” with high used- and new-car prices and rising interest rates pushing monthly payments higher, Krebs said.
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“Affordability is a growing issue for everyday Americans trying to buy new vehicles,” Edmunds.com analyst Jessica Caldwell said in a new study released Wednesday.
New vehicles cost on average $47,713 in March 2023, compared with an average $35,794 five years ago.
Then, unlike now, consumers also had more compact, cheaper models to choose, cars that auto makers scratched from their lineups as U.S. consumers continued to prefer SUVs and pickup trucks.
“Over the last decade, low interest rates combined with longer loan terms allowed Americans to embrace the ‘bigger is better’ mentality and buy larger, more richly equipped trucks and SUVs that dominate the roads and driveways across the country today as small vehicles are going extinct,” Caldwell wrote.
With rising interest rates, however, and without many vehicle options at the lower end of the market, “buying a new vehicle will likely be out of reach for many consumers.”
Edmunds.com tracked the “disappearance” of the $20,000 new vehicle, it said: In March, 0.3% of new vehicles sold were $20,000 or under, compared with 8% five years ago.
It gets only a little better at slightly higher prices, Caldwell said. Last month, just 4% of new vehicles sold were $25,000 or under, compared with 24% five years ago;
17% of new vehicles sold were under $30,000, compared with 44% five years ago.
In contrast, 17% of vehicles sold in March were $60,000-plus, compared with 6% five years ago; 10% of vehicles sold were $70,000-plus, compared with 3% five years ago.