Yahoo Finance Memorial Day deals: High new car inventory could be good for buyers this weekend
New car inventory is at its highest in years, especially for domestic brands, which means car buyers should find some good deals this holiday weekend, experts said.
The rich inventory and pent-up demand — after many car buyers have been delaying a purchase due to tight supply and high prices — has some dealers bracing for big crowds this weekend. Michigan-based Matick Chevrolet in Redford, for example, will forego its tradition of grilling burgers for customers on Friday to focus on moving metal, said Paul Zimmermann, who is a partner in Matick Automotive, which owns Matick Chevrolet in Redford Township, Matick Buick-GMC in Southfield and Matick Toyota in Macomb.
“We are too busy this year, we don’t have the resources," for a cookout, Zimmermann said. "The inventory is as strong as it’s been, really since August 2021, that was really the last month before the supply chain shortage hit everything. There is some momentum for us to want to be aggressive and sell what we can."
At Gordon Chevrolet in Garden City, Michigan, owner Gordon Stewart said the store needs to sell everything it has in stock to earn fresh inventory from the factory.
"We have reasonable inventory now, the pressure is on us to turn inventory as fast as we can," Stewart told the Detroit Free Press, part of the USA TODAY Network. "It means short profits for us, good deals for consumers. We need trade-ins too. It’s a great time to buy a car because there is such a demand for used cars right now, people do well to trade them in."
Stewart said his profit margins are down by 10% to 20% this year due to having to make deals to move the higher inventory. As for trade-ins, he said a 3-year-old car is worth $500 to $1,000 more today than it was six months ago due to the shortage of used car inventory.
Finance and lease deals
Cox Automotive said new car inventory in the United States was at 2.84 million vehicles at the start of May, the highest point since late 2020. The higher inventory is pushing down prices, Cox analysts said, adding that factory incentives are running at twice the levels seen a year ago.
The average incentive package in January through April this year has been $2,919, compared with $1,481 in the year-ago period, Cox spokesman Mark Schirmer said. For those reasons, Cox analysts predict the Memorial Day sell-a-thons of the past will return this holiday weekend.
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“Toyota, Honda and Kia — there is still so much pent-up demand for these brands; inventory is tight, and sell-through rates are high," said Brian Finkelmeyer, Cox's senior director of Insights and Advisory, in a statement. "On the other hand, Stellantis, Ford, GM, Mazda, Nissan and a few others, the dynamics have really shifted. The party is over for the most part, and they’re hustling for every sale. Incentive dollars are being focused on (financing) deals and lease rates, efforts to drive business to their captive finance companies. That’s where consumers will find deals this weekend."
For deals: forget about SUVs, but consider EVs
While there are deals to be had, new cars remain expensive. The average price for a new vehicle sold in April was $48,510, Cox data showed. But that's down from $48,763 in April 2023. Over the past few months, the average transaction price has been dropping compared with a year ago, Schirmer said.
Interest rates on new and used car loans remain high. According to MarketWatch, the average interest rate for a new car loan in Michigan is 6.81%.
Still, Brian Moody, executive editor of Cox's Autotrader and Kelley Blue Book, said, “This market can be a gold mine for new vehicle buyers, if they know where to look."
"The deals are likely to be had on slower-selling models, specifically sedans and hatchbacks," Moody said in an emailed statement. "With compact SUVs selling in higher and higher volumes each year, don’t bother: You will likely be paying full sticker price. However, subcompact SUVs have a lower asking price and often better deals."
Moody said if a consumer is considering an electric car, this is a good time to buy. Taxpayer-funded incentives are abundant, including on hybrids. Many EVs now qualify for a $7,500 tax credit even at the time of purchase.
"EV prices have come down significantly; discounts and incentives are aggressive," Moody said. "Electric cars aren’t for everyone, but for those who can charge up at home and are looking for a good deal, an EV could be an excellent choice.”
Best deals are on 2023 models
The best discounts will be on 2023 model-year vehicles, according to car shopping site Edmunds.com. But good luck finding one. In May the share of 2023 model year cars on dealer lots nationwide was just 6.8%. If you do find one, the average discount is $4,147, compared with $1,741 for a 2024 model, Edmunds said.
Also, a 2023 model typically commands a lower interest rate. Edmunds said about a quarter of purchases of 2023 models this month financed at dealerships carried an average annual percentage rate of 1.99% or less. But only about 4% of 2024 models financed had that same APR.
Edmunds analysts said in a news release that Detroit automaker brands have the biggest buildup of inventory on dealer lots and therefore could offer the best discounts for car shoppers this holiday weekend. For the month, Dodge, Chrysler and Buick topped the list of makes with the highest concentration of 2023 model year vehicle listings nationwide at 52.6%, 38.4% and 17.6%, respectively.
The average discount on 2023 models for Dodge is $6,753; for Chrysler, it is $6,252; and for Buick, it is $4,256, Edmunds data showed. Toyota, Subaru and Honda topped the list of makes with the smallest share of 2023 model-year vehicle listings nationwide, all less than 1% of total listings. Edmunds said the average discount on a 2023 model Toyota is $1,337, Subaru is $1,450 and Honda is $786.
“Supply chain disruptions and limited inventory left little to be excited about in summer holiday car shopping the past few years, but discounts on outgoing model year vehicles this Memorial Day weekend are a bright spot for consumers in an otherwise challenging market,” said Jessica Caldwell, Edmunds’ head of insights.
'More options' for customers
The differences in inventory levels — and deals — at Zimmermann's three dealerships are noticeable.
At his stores, he has mostly 2024 model year vehicles. At the Chevy store in Redford, he has about 570 new vehicles in stock, more than double what he had at this time a year ago. At his Buick GMC store in Southfield, he said he has 300 new cars in inventory, up from 100 in the same year-ago period. But at his Toyota store in Macomb, he has 75 new vehicles in stock, which is still more than he had a year ago when he barely had two dozen.
While none of those inventory levels compare to the pre-COVID-19 days when he easily stocked 1,000 to 1,500 new cars a month at his Chevy store, it is an improvement for car buyers.
"There’s more options, and with that, there’s comfort in getting what you want," Zimmermann said. "In Detroit especially, because of the lease market. There are still fantastic trade-in prices. We have dedicated staff looking for trade-ins because there’s a demand for all used cars. So your transaction cost might be a little higher on new, but it could be offset by a trade-in vehicle."
As for deals, he said the leases have gotten more aggressive, especially with GM vehicles. There is a two-year lease deal on a 2024 Chevrolet Trak compact SUV for $275 a month with $2,000 down, he said. On the Chevrolet Silverado, there is a 3.9% financing deal and "a lot of bonus cash they put on the trucks in Chevy and GMC."
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Even the new Blazer EV is "all of a sudden super aggressive" lease of a $400 a month payment with $2,000 down.
'A moment of caution'
At Gordon Chevrolet, Stewart said he has about 125 new cars in inventory, mostly 2024 models, not near the pre-COVID-19 level of 750, but the flow is better than it has been in recent years. He said there is a good lease deal now on the 2024 gasoline-powered Blazer at $229 a month. He did not have the further details about leasing terms.
More: Vehicle sticker prices likely to increase in 2024, but deals still possible to find
Edmunds' Caldwell said the holiday weekend sales will be good for consumers, but she warned dealers and automakers, "the trend serves as a moment of caution surrounding the old habits of overproduction and inventory glut. It’s also a reminder that the expensive vehicles now being discounted were strong sellers one to two years ago, showing just how significant high interest rates are in today's market."
Contact Jamie L. LaReau: jlareau@freepress.com. Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.
This article originally appeared on Detroit Free Press: Memorial Day: Holiday car sales and deals expected to return this year
