Car Sales Are Speeding Up, But Dealers Still Have Too Much Inventory

America’s car dealers started March with an oversupply of new vehicles. They worked hard through the month and sold cars at a faster clip than the month before. As a result, they started April with an oversupply of new cars.

Wait, what?

Car dealerships started March with 2.74 million new cars in stock. They ended it with 2.77 million, despite brisk sales. Car sales always pick up in spring as tax return season begins. But this year, it wasn’t enough to offset high production at some factories.

That means many dealers have more cars on the lot than they’d like. Car dealers measure their stock in days of inventory – how long it would take them to empty the lot at today’s sales pace if they didn’t acquire more.

Traditional industry practice tells them to aim for 60. The average dealership today has 72.

A Backlog Means Discounts

That means discounts on many new cars. The price of the average new car fell to nearly a 2-year low last month, at $47,218. Incentives made up 6.6% of that price – more than double the discounts common a year ago.

With inventory still high, the figure is likely to grow this month.

But Not At Every Brand

The situation changes, however, from brand to brand.

Many Asian brands have thin supplies even now. Toyota dealers have just 33 days’ worth of new cars on hand – numbers similar to the peak of the COVID-19 supply chain crisis. You won’t find heavy discounts at your local Toyota dealership.

Lexus, Honda, Land Rover, and Kia are also below the 60-day supply target. Those dealers do not need to cut you a deal.

At the other end of the scale, however, Jaguar, Dodge, Ram, Alfa Romeo, and Fiat all have 144 days or more.

The most affordable cars are the hardest to find. Vehicles under $40,000 have the tightest supply. Those priced over $80,000 average 75 days’ supply.

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