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Auto Sales Are Down, But Dealer Profits Are Up

In Topsy-Turvy 2020

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That is, new-vehicle sales will be around 14.5 million cars and trucks combined in 2020, down about 15% from 17.1 million in 2019, according to a joint auto sales forecast from J.D. Power and LMC Automotive.

The drop in sales this year isn’t for lack of demand, it’s more because inventories are low, analysts report. On average, dealers are getting top dollar for new vehicles.

J.D. Power and LMC Automotive said the average dealership gross profit per new-vehicle, including finance and insurance, was expected to reach $2,053 in December. That’s an increase of $813, or 66%.

Not counting fleet sales to businesses, governments and rent-a-car companies, retail sales to individual customers would be down 9.5% in 2020, to 12.4 million, the forecasters said. The pandemic really took a bite out of fleet sales, especially airport rentals.

Monthly U.S. auto sales in 2020 bottomed out in April, with auto factories closed, and most U.S. dealerships limited to online sales only. Factories and dealerships started reopening in May, but monthly new-vehicle sales didn’t achieve year-ago levels again until September 2020, and because of the earlier shutdowns, new-vehicle inventory is still relatively thin.

For the month of December, J.D. Power and LMC Automotive expect sales to be 1.4 million. On a daily selling rate basis, that would be an increase of 1% over December 2019.

Adjusting for selling days — that is, not counting Sundays and legal holidays — is an important distinction for December 2020, because the month just ending has three extra selling days. Without the adjustment, comparing the raw numbers, the total for December would be up 13.1%, which presents an unrealistically rosy sales picture.

Separately, Edmunds issued a slightly lower 2020 sales forecast of around 14.4 million.

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