New Car Sales Slow in May, Down 6.5% for Credit Unions

Cox Automotive predicted May’s new car sales will be strong when the month ends over the Memorial Day holiday, but not quite as strong as April’s stellar performance.

But how much of the sales will show up as loans on credit union balance sheets is uncertain: CUNA Mutual Group’s Credit Union Trends Report released Thursday showed credit unions held $137.6 billion in new car loans as of March 31, down 6.5% from a year earlier. Used car loans rose 4.8% to $244.1 billion.

An Experian report released May 20 showed credit unions originated 20% of the number of loans in the three months ending March 31, down from 20.8% for all of 2020, 21.9% in 2019 and a peak of 24.5% in 2018. Banks, captives and other lenders increased their share from 2020 to the first quarter.

Cox Automotive on Wednesday forecast dealers will sell 1.54 million new cars in May, which translated into a seasonally adjusted annual rate (SAAR) of 16.5 million vehicles.

That was an improvement from 12.1 million SAAR in May 2020, when many showrooms were closed by the COVID-19 pandemic, but it was down about 11% from April’s robust 18.5 million SAAR.

Cox Automotive Senior Economist Charlie Chesbrough said a better measure to judge the market’s slowing performance was May 2019’s 17.3 million SAAR.

“Supply is more than 40% below last year’s levels, and many dealers have little inventory available,” Chesbrough said. “Memorial Day weekend is historically one of the biggest selling periods of the year. What’s historic now is the exceptionally low inventory.”

The Irvine, Calif., data analytics company said it is expecting the tight inventory situation to remain throughout the summer and possibly for the rest of 2021. Production shutdowns during the initial COVID crisis last year, and various supply chain disruptions including the global computer chip shortage, have left the industry with too few vehicles.

Dealers have about 42% fewer vehicles in their showrooms this month than they did a year ago.

The supply shortage means buyers will likely pay more, as well, if they find a suitable vehicle. Transaction prices are high due in large part to a more expensive product mix of tech-heavy crossovers and SUVs. Sales incentives have also been low, and dropping, in 2021.

Given the low supply and strong demand in the market today, buyers will find fewer “good deals” this Memorial Day weekend. Fortunately, according to recent research by Kelley Blue Book, the majority of shoppers are not expecting traditional deals this holiday weekend. In fact, many are anticipating, and willing, to pay over sticker price for a new vehicle.