June auto sales on a ‘SAAR’ basis (seasonally adjusted annualized rate) fell 1.2% from May to 16.5 million ‘SAAR.’ The non-SAAR number available from sources like Autonews.com show a 3% year over year drop from June 2016. The year over year comparison for the same month eliminates seasonality and it eliminates statistical errors compounded by the annualization calculation.
It was the 6th month in a row that auto sales declined. June’s 16.5 million SAAR was 11.7% below the all-time high of 18.7 million SAAR (December 2016). This is a large decline that is not being given much attention in the financial media.
But it’s worse, especially for the domestic OEMs (GM, Ford, Chrysler). GM’s sales dropped 4.8%, but its car sales plunged 38.2% (truck sales were up 11% with huge incentives). Ford’s sales fell 5%, truck sales were up 2.2% but car sales tanked 23%. Chrysler’s sales were down 7.4%. These numbers are on a year over year basis for June.
Sales are plummeting despite the fact that automakers spent a record amount on cash incentives. Financing terms for the subprime debt being used to pay new cars continues to loosen. The average monthly car payment increased to $517 from $510 in May and the average term rose to a record 69.3 months and the total amount financed hit another all-time high (just under $31,000). You’ll note that subprime delinquency/default rates are starting to approach 2008 levels.
This post was published at Investment Research Dynamics on July 5, 2017.
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