February sales down 2.3 percent, but SAAR still strong

February is usually one of the weaker months of the year for auto sales, and in that respect, last month was not atypical. Sales fell by 2.3 percent as manufacturers decided to pull back on incentives and interest rates started their inevitable upward climb.

 

Last year’s average incentive spend of $3,400 simply wasn’t sustainable, said Jessica Caldwell, Edmunds executive director of industry analysis. At some point, manufacturers realized they are borrowing from the future.

 

The seasonally adjusted annual sales rate (SAAR) was 17.2 million, down from January, but still the sixth straight month above an historically strong 17 million.

 

The same trends of the past few years continued – strong crossover sales and continually weakening passenger car sales. At General Motors, car sales were down 16 percent, as were pickups – usually a source of solid profit.

 

“This year is going to be a bitter but necessary pill for the auto industry to swallow,” said Caldwell. “Automakers are slowing production of passenger cars to react to declining demand, and are also trying to find the right balance between keeping sales strong and becoming too dependent on costly incentives.” But the industry is still fairly healthy overall, she said.

 

The prevalence of crossovers meant the average transaction price remained strong last month,  rising 2.1 percent to $35,444, according to Kelley Blue Book.

“Even with new-vehicle demand expected to continue to slow in 2018, average transaction prices have been unaffected, though incentives have risen similarly to offset part of the extra cost,” said Tim Fleming, analyst for Kelley Blue Book. “The numbers indicate that new-car buyers are still willing to pay top dollar for the latest models with the most current features and technology.”

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