New Car Sales Post Significant Gains in May

Inventory concerns are taking a back seat, but high interest rates are curbing new car demand.

May 30, 2023

ATLANTA—New car sales are expected to be significantly higher year over year, according to Cox Automotive. The annual new-vehicle sales pace in May is expected to finish near 14.9 million, up 2.3 million from last May’s 12.6 million pace but down from April’s 15.9 million level.

May sales volume is expected to rise 20.3% from one year ago and reach 1.35 million units. Sales volume will fall 1.1% from April, which had one additional selling day. Sales are being impacted by affordability issues, fueled by high interest rates and elevated new-vehicle prices. Typical monthly payments for new-vehicle loans are well above $700 in today’s market.

“New-vehicle sales will show strong gains this month over last year’s levels, and on the surface, this is a bit surprising,” said Cox Automotive Senior Economist Charlie Chesbrough. “Interest rates are substantially higher than a year ago, as are vehicle prices, and yet sales will increase year over year. The reason? Vehicle shoppers now have a much better chance of finding something that fits their needs. Pent-up demand, held back by limited product availability last year, is now being fulfilled as inventory levels improve around the country.”

Compared to a year ago, the forecast for May reveals a significantly changed market. Inventory levels have improved significantly, so sales volume is forecast to jump more than 20% year over year. A year ago, according to an analysis of Auto Available Inventory data, total new-vehicle inventory at retail outlets across the U.S. stood at approximately 1.1 million units. This year, heading into the month of May, inventory was at a two-year high and above 1.9 million units, an increase of nearly 70%.

Tight inventory was the key driver of lower sales in 2022. This year, as inventory builds for many brands, demand, not supply, is becoming the market driver.

Although new-vehicle sales have shown resilience so far in 2023, Cox is forecasting some slowdown in the second half of this year.

“Economic headwinds have not subsided and are expected to slow the vehicle sales recovery, although more incentives and more fleet volume will continue to support overall sales volume,” Cox wrote in a news release.

Anchored by Memorial Day weekend, May is a stronger month for new-vehicle sales. In May 2023, there are 25 selling days, one fewer than last month, and while sales volume of 1.35 million is a notable gain over last year, May sales volume averaged 1.57 million units from 2015 to 2019.