Buyers can expect sweeter deals on small and mid-size cars as automakers try to clear out excess inventory amid declining sales, even as larger vehicles continue to sell well.
For shoppers, it’s a tale of two lots. On one lot are passenger cars, which are flailing as gasoline prices fall. On the other are crossovers, sport-utility vehicles and pickups, which are flourishing as drivers choose roomier designs.
The divergence deepened in July as overall auto sales fell 7% from a year earlier to 1.42 million vehicles, according to Autodata.
With struggling passenger cars, “consumers are going to start to see better incentives, lower financing, possibly more zero-percent-interest rates, more cash on the hood to move these vehicles,” AutoPacific analyst Dave Sullivan said. “You’re not necessarily going to find significant sums of cash to move crossovers right now.”
In addition, buyers will eventually have fewer choices of passenger cars as automakers shift more of their engineering resources into crossovers, SUVs and pickups.
Average discounts per vehicle rose 5% to about $3,600, compared with a year earlier, Kelley Blue Book analyst Alec Gutierrez said. Meanwhile, transaction prices increased about 1.7%, meaning the effective price people paid was lower overall.
Automakers are turning to cash incentives and financing offers to keep the sheet metal moving, particularly with passenger cars. Average interest rates on new-vehicle loans hit their lowest level in six months as automakers promoted zero-financing offers, according to Edmunds.com.
And the average length a new vehicle sat on a dealership lot in July was 76 days, the highest in that month since 2009, according to Edmunds.
Most of the extra discounts were concentrated on passenger cars, but deals weren’t even across the board.
Japanese automakers Toyota, Honda and Subaru maintained lower-than-industry-average incentives and still reported resilient sales. Toyota and Subaru bucked the industry trend by reporting sales gains of 3.6% and 6.9%, respectively. Meanwhile, Honda’s car sales held up impressively, powered by a strong month for the Civic compact sedan.
But General Motors, Ford and Fiat Chrysler, the three automakers traditionally known as the Detroit Three, were down 15.5%, 7.4% and 10.5%, respectively.
Japanese automakers Nissan and Honda reported sales declines of 3.2% and 1.2%, respectively.
Korean auto brands Hyundai and Kia were down 27.9% and 5.9%, respectively.
Small car sales fell 12%, while mid-size car sales declined 16.2%, according to Autodata.
Subcompact cars such as the Hyundai Accent, Chevrolet Sonic and Ford Fiesta posted double-digit declines. Mid-size cars such as the Chevrolet Malibu, Ford Fusion and Nissan Altima also suffered double-digit decreases. But crossovers such as the Honda HR-V, Toyota RAV-4 and Subaru Outback enjoyed double-digit increases.
Despite the tumble for passenger cars, overall industry sales remain near historic highs. IHS Markit projected full-year sales of 17.1 million vehicles, trailing 2016’s record 17.6 million.
“We’re still operating at a very high level,” Ford U.S. sales boss Mark LaNeve said.
At these volumes, most automakers remain very profitable.
“From a macro perspective the fundamentals in the industry are very, very strong,” Kelley Blue Book’s Gutierrez said.
Here’s how the major automakers fared in the U.S. in July:
Edmunds projection: -10.8%
Kelley Blue Book projection: -9.1%
Actual results: -15.5%
Three of GM’s four brands posted double-digit percentage sales declines in July. Chevrolet was down 15.4%, Cadillac fell 21.7% and Buick plunged 30.5%, while GMC was down 7.3%.
There were few bright spots. The company has been focusing heavily on sales to consumers, but retail sales declined 14% for the month.
GM’s sales to fleet customers, including rental car firms, fell sharply, too.
The Detroit automaker’s passenger cars endured steep declines for the month. The Chevy Spark minicar withered, falling 81.9% to 764 units for the month, while the Chevy Sonic subcompact car declined 47.3% to 2,552.
Edmunds projection: -5%
Kelley Blue Book projection: -6.2%
Actual results: -7.4%
The Dearborn, Mich.-based automaker said its retail sales fell 1% while fleet sales declined 26.4%.
The flagship Ford brand fell 7.7%, while the luxury Lincoln brand declined 2.5%.
Car sales were off 19.4%, including a 12.5% decline for the Ford Fiesta subcompact and a 42.2% decline for the Fusion mid-size car.
Edmunds projection: -7%
Kelley Blue Book projection: -6.9%
Actual results: -10.5%
All of the company’s major brands, except Ram, were down double digits. Jeep was down 12.3%, Chrysler 30.1%, Dodge 11.9% and Fiat 18%. Ram sales were flat.
The company has been making a concerted effort to reduce its reliance on less-profitable fleet sales. Retail sales were down 6%, while fleet sales were down 35%.
Edmunds projection: -3.4%
Kelley Blue Book projection: -4.3%
Actual results: 3.6%
The Japanese automaker soared past expectations for a surprise sales gain. The company’s flagship Toyota brand and luxury Lexus brand were each up 3.6%.
With the strong sales performance, Toyota surpassed Ford in July as the nation’s second-largest automaker for the month, behind only GM.
Leading the way was the red-hot RAV4 crossover, which hit an all-time monthly sales record of 41,804 units, up 31.1% for the month.
Still, Toyota’s passenger cars declined 11.5% for the month, reflecting the general industry trend. Sales of crossovers, pickups and SUVs rose 17.4%.
Edmunds projection: -4.6%
Kelley Blue Book projection: -3.8%
Actual results: -1.2%
The Japanese automaker’s passenger cars continued to display resiliency despite the segment’s struggles. Passenger car sales rose 1.9%, while sales of crossovers, SUVs and pickups fell 4.2%.
The company’s namesake Honda brand was down 1.7%, while the Acura luxury brand was up 3.7%.
Edmunds projection: -1%
Kelley Blue Book projection: -5.6%
Actual results: -3.2%
The Japanese automaker’s crossovers, SUVs and pickup trucks recorded a 5.3% increase, but sales of passenger cars declined 11.2%
The company’s namesake brand fell 4.1%, while the luxury Infiniti lineup increased 9%.
Edmunds projection: -5.2% (VW and Audi brands)
Kelley Blue Book projection: 0% (VW, Audi and Porsche brands)
Actual results: The German automaker’s namesake Volkswagen brand posted a 5.8% sales decline for the month. Its Audi luxury brand was up 2.5%. Porsche sales rose 0.6%.
Edmunds projection: (not provided)
Kelley Blue Book projection: 3.7%
Actual results: 6.9%
The Japanese automaker’s hot streak continued as its sales surged despite the industry’s downturn. Subaru’s top seller was the Outback, which rose 19.6% to 17,581 units.
Edmunds projection: –10.6%
Kelley Blue Book projection: -11.1%
Actual results: Korean automaker Hyundai’s sales plummeted 27.9% as the company continued to reduce its previously heavy reliance on fleet sales. Sister brand Kia’s sales fell 5.9% for the month.