There is still no break in sight for high new car prices, which are on track to set a new record in May, with interest rates also rising, according to a joint report. prediction from JD Power and LMC Automotive.
The average transaction price for new vehicles is expected to hit a record high for the month of May of $44,832, the May 25 forecast said. That’s a staggering increase of $6,577, or about 16%, compared to the May 2021 estimate.
What is driving the record high prices is the ongoing shortage of computer chips, which is limiting the production of new vehicles. Predictors for JD Power and LMC Automotive expects new vehicle sales of approximately 1.2 million cars and trucks in May, down 18% from May 2021, based on estimated daily sales rates.
Thomas King, president of the data and analytics division at JD Power, said in the forecast that month-end inventory for May is expected to be less than 1 million cars and trucks. That’s the 12e consecutive month of inventory below 1 million, he said.
With too much demand versus too little supply, “record transaction prices are the result,” King said.
Cox Automotive said in a separate prediction published on May 24 that new vehicle inventory was down 48% from a year ago. That is a total of 1 million fewer cars and trucks than at the beginning of 2021 and 2.5 million fewer than in 2020.
Primarily due to continued low inventories, Cox Automotive has lowered its full-year 2022 forecast for U.S. auto sales to 15.3 million from a forecast of 16 million early this year. Even reaching 15.3 million will require stronger sales in the second half of 2022, Cox Automotive said. So far, a stronger second half this year seems less likely.
Interest rates are still moderate on average by historical standards, but interest rates are also rising.
According to JD Power and LMC Automotive, the average auto loan rate in May is expected to be 4.92%, up 62 basis points, or 0.62 percentage points, from a year ago.
Cox Automotive’s forecast says, “Rising interest rates could make affordability a bigger issue in 2022.”