Storms Send Car Sales Sliding Down In February, TrueCar Says

February 2020 might be remembered as the last of the good car sales months. This month’s sales are expected to be off considerably from same-month sales last year, according to TrueCar, Inc., a consumer and auto retailer service with close connections to the U.S. car market. Last year the auto market roared into February on the strength of a surging economy and sales reflected a buoyant mood. Then the COVID-19 crisis hit, and sales in March and April 2020 fell off the cliff before beginning to recover as the year unfolded.

This month TrueCar projects that total new vehicle sales will reach 1,170,856 units, down a sobering 7.6% from a year ago when adjusted for the same number of selling days. The seasonally adjusted annualized rate (SAAR) for total light-vehicle sales for the month is estimated at 15.5 million units. Total light-vehicle sales were 14,665,787 in calendar-year 2020, down 16.08%, according to statistics gathered by goodcarbadcar.net. Despite the February decline, analysts are not overly concerned by the predicted results for the month.

“New vehicle retail sales are expected to be flat for February, which is a good result given the expansive and prolonged nature of the winter storms throughout many parts of the country, including southern states, which do not typically experience snowstorms of this caliber,” said Nick Woolard, lead industry analyst at TrueCar. “At this time, many people are thinking about basic necessities, not purchasing their next vehicle. Those consumers are likely deferring their vehicle purchasing to the end of the month or to March.”

Retails sales give rise to some of that optimism. U.S. retail deliveries of new cars and light trucks are projected to be 967,545 units, a decrease of only 0.4% from a year ago when adjusted for selling days. Continued lockdowns and retarded vehicle use, in general, are partly responsible for the steep dip in fleet sales. Parts shortages, particularly microchips, are also having a negative effect on production and sales.

“We’re seeing fleet recovery slow down significantly year-over-year,” Woolard said. “February is typically a big month for fleet sales, but the continued reduction in travel by consumers is delaying fleet recovery. This may be a sign that manufacturers are beginning to triage the ongoing microchip shortage by further pulling back from fleet and reallocating towards retail to help limit inventory shortages.”

While retail and fleet sales are down, average transaction prices are projected to be up a robust 6.6% or $2,366 from a year ago and up 1.4% or $518 from last month. This continued trend demonstrates that while many buyers find themselves financially unable to purchase a new car, those consumers who feel they can are opting for more expensive models with additional equipment.

Perhaps feeling a financial pinch from the prolonged period of lackluster sales, automakers offered consumers lower incentives this month than at any time in the past three years.

“As average transaction price continues to increase and inch closer towards the $40,000 mark, incentives continue to trend downward,” said Valeri Tompkins, senior vice president, OEM Solutions at TrueCar. “Based on TrueCar data, incentives are the lowest that we have seen since at least 2017. With inventory still recovering from pandemic-related production pauses and the chip shortage threatening to disrupt production again, incentives will stay low until the recovery is met.”

At retail, Daimler (Mercedes-Benz), Honda, Nissan, Subaru, and Kia are all expected to experience double-digit drops. The Daimler fall-off is the most marked — TrueCar expects it to be down 30.2% year over year. Tesla is the only brand predicted to be in positive territory.

Used vehicle sales for February 2021 are expected to total 3.5 million, down 12% from a year ago but up 12% from last month. Many consumers are switching from public transportation to used cars during the pandemic, but prolonged unemployment has, at the same time, dampened used car sales. The average interest rate on a new-vehicle loan is 4.4% and the average interest rate on used vehicles is 8.0%.