New vehicle inventory remains extremely tight, with retail inventory below a million vehicles for the twelfth consecutive month.
“The industry sales pace is being dictated by how many units are delivered to retailers during the month, and demand far exceeds supply,” Thomas King, president of the data and analytics division at J.D. Power, said in a statement. “Record transaction prices are the result.”
New vehicle prices have reached near-record highs. The average transaction cost of a new vehicle in May is expected to reach $44,832, the third highest level on record, and a 15.7% increase from last year. The record high of $45,247 was set in December 2021.
Buyers are still expected to spend $45.4 billion on new cars and trucks, an $8.3 billion decrease from May 2021. Fleet sales are forecast to increase 3.8% in May 2021.
Although production is expected to increase in the latter half of 2022, vehicle prices are unlikely to decline, according to King.
While factors like an increase in vehicle supply and higher interest rates will likely lead to a slowing of vehicle price increases, they are “unlikely to lead to declines,” he said.