March 2017 Sales; New-Car Inventory Reaches Highest Levels Since 2004 | Edmunds

March 2017 Sales; New-Car Inventory Reaches Highest Levels Since 2004


New-car sales slumped in March 2017, causing the already inundated inventory on dealer lots to reach its highest level since 2004, according to Edmunds' monthly sales analysis. Sales through the first quarter were down 1.6 percent from 2016. Although March sales numbers fell below analysts' predictions, a general drop had been expected. At some point, last year's record pace was bound to slow down.

In addition to lower consumer demand in March, sales fell because of a steep drop in fleet sales compared to the prior year, Edmunds analysts said. Fleet sales to rental car companies, small businesses and municipal fleets have long been used to bolster sales among the major automakers.

March's tepid sales, along with the high inventory, mean that there will be even more vehicles for shoppers to choose from this month. That's a good thing for consumers, but it may not last for long.

"Record-high inventory leads to more consumer incentives in the short term," said Jessica Caldwell, Edmunds executive director of industry analysis. "But as the auto industry comes to terms with the new norm of auto sales — sales that are not in a constant state of growth — they will be better aligning supply with demand."

Caldwell noted that production has already dropped for cars since they have fallen out of favor with consumers. She expects SUV and truck production will likely cool off as well.

March was also notable because it was the month in which the Federal Reserve raised interest rates, which caused the average new-car loan rate to rise above 5 percent for the first time since 2010.

"The industry has banked on access to cheap credit to bolster sales since the recession," said Edmunds senior analyst Jeremy Acevedo. "So this will be an important metric to keep track of."

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