Pent-up Demand Expected to Buoy New-Vehicle Sales in Q2

Pent-Up Demand Expected to Buoy US New-Vehicle Sales in Q2

Edmunds is forecasting second-quarter sales of more than 4 million new cars and trucks.

Second-quarter U.S. sales of new cars and trucks will post a year-over-year increase, according to an Edmunds forecast.

The firm is forecasting second-quarter sales of more than 4 million new cars and trucks. That’s up 16.1% compared to second-quarter 2022 and up 13.8% compared to first-quarter 2023, according to Edmunds.

“If you look at Q2 in the aggregate, new-vehicle sales appeared to settle into a stable groove, which is a nice departure from the tumult that the industry has witnessed over the last few years,” said Ivan Drury, Edmunds’ director of insights. “More consumers returned to the market with older trade-ins, which indicates that pent-up demand helped buoy sales. But digging a bit deeper into the data, June tells a slightly conflicting story. After five consecutive months of increasing discounts and vehicles sitting on dealer lots for longer periods of time, June shows that those trends are stalling a bit.”

Edmunds data reveals that the average age of vehicles traded in toward new-car purchases increased in Q2 2023, climbing to 5.6 years, compared to 5.2 years in Q2 2022 and 6.1 years for Q2 2019. Edmunds analysts note that inventory also has continued to slowly improve but isn’t close to returning to pre-pandemic levels – which is keeping prices elevated.

“This road to recovery for the industry has been a winding one,” Drury explained. “With many automakers committing to better aligning production and demand, we might be on the cusp of seeing what a new normal sales pace looks like compared to the pre-pandemic years, when bloated inventories and deep discounts shaped the industry. Automakers and dealers are well-prepared to pivot amid shifting market dynamics, but this isn’t the best news for consumers hoping for more generous deals heading into the Fourth of July weekend. A return of summer sales banners, waving inflatables and tent events are more likely to be an exercise in advertising over the next few months than desperation to move the metal.”

Edmunds analysts advise consumers to approach car shopping with a pragmatic mindset even if they encounter sales messaging or promotions this summer, because interest rates are expected to stay elevated and discounts likely will be limited.

“If holding off on a car purchase is no longer possible this summer, it’s time to seriously evaluate your list of must-haves versus nice-to-haves,” said Drury. “Are you really planning on using that third row? Do you really need those extra bells and whistles? Because any of those upgrades are likely going to cost you far more than you might expect.”

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