New light-vehicle sales in April 2022 improved slightly compared to March 2022. April 2022’s SAAR of 14.3 million units represents an increase of 6.5% compared to March of 2022. However, April 2022’s SAAR was down by 21.9% compared to the stellar sales pace seen in April of 2021 which was driven by strong consumer demand and enough inventory available to meet that demand. April 2021 was one of the last sales months before inventory began to decline significantly and limit the sales pace. We don’t expect that April’s month-end inventory level will change much from March’s level of 1.23 million units as the industry is still unable to produce enough vehicles to meet current demand, let alone restock dealer lots.
Since OEMs are limited in their production capacity, many have prioritized the production of higher priced models. According to J.D. Power the industry average transaction price in April 2022 is expected to be an April record of $45,232, up 18.7% year over year and just slightly behind the all-time record observed in December 2021. In addition to the production mix, fewer OEM incentives have pushed transaction prices higher. J.D. Power expects average incentive spending per unit to fall to an all-time low of $1,034 in April. While average transaction prices have risen steadily, average monthly payments have not increased as rapidly due to higher trade-in equity. Average monthly payments, expected to hit an April high of $685, have increased by 15.6% year-over-year while transaction prices are up 18.7% over the same period, J.D. Power says. This week the Fed is expected to increase interest rates for the second time this year and is expected to significantly increase interest rates throughout the rest of the year. As a result vehicle finance rates, which have been a tailwind for vehicle sales over the past few years, will likely shift to a headwind for vehicle sales and vehicle affordability.
For the rest of the year vehicle availability will continue to be the principal limiting factor for new light-vehicle sales. Our forecast for sales in all of 2022 remains unchanged at 15.4 million units.