Auto dealers are selling fewer new cars. Here's why the industry isn't nervous

  • Consumers spent $5 billion on new vehicles in the first half of this year, according to J.D. Powers.
  • Prices paid for new cars are rising, the report says.
  • However, the total number of cars, trucks and SUVs sold at dealerships between January and June has slipped to its lowest level in four years.
Keith Monnin, CEO of Bernardi Auto Group, looks over a dealership in Framingham, MA.
Suzanne Kreiter | The Boston Globe | Getty Images
Keith Monnin, CEO of Bernardi Auto Group, looks over a dealership in Framingham, MA.

In many ways, these are the best of times for auto dealers.

A new report by J.D. Power shows consumers have spent $5 billion more on new vehicles in the first half of this year than last year as prices paid at dealerships keep rising. Unfortunately, the total number of cars, trucks and SUVs sold at dealerships between January and June has slipped to its lowest level in four years.

“The industry is certainly more cautious right now,” said Jeff Schuster, president, Americas operations and global vehicle forecasts at LMC Automotive. “Historically, slower retail sales is a sign things are cooling off.”

J.D. Power says retail sales of new vehicles totaled 6.67 million in the first half of this year, down about 100,000 vehicles from 2015's high of 6.77 million vehicles. Some of that is due to the fact the used market has seen an influx of more 3- and 4-year-old models giving many buyers a more affordable option for a vehicle that is likely in good shape.

So why aren’t automakers or dealers nervous? It’s because buyers are willing to spend more on the new models they are driving off the lot. In the first six months of this year, the average price paid for a new vehicle was $32,221, up $824 from last year, according to J.D. Power.

“The buyer continues to be willing to spend more,” said Schuster. “That’s good news for automakers and dealers. It means profit margins remain strong.”

Consumers are buying more SUVs, pickups and crossover utility vehicles that carry higher sticker prices, and that is helping to boost prices.

They also are spreading out their loan payments over a longer period of time in order to secure a lower monthly bill. Experian, which tracks auto financing, says the average new vehicle auto loan in the first quarter of 2018 had a term of just over five years, seven months, with a growing number buyers now willing to stretch out payments over seven and eight years. In the first quarter, the average monthly payment for a new vehicle was $523, according to Experian.