Auto Sales Climb 13% as Consumers Continue to Spend

Interest rates and inflation are apparently no match for the consumer’s desire for a new car.

New vehicle sales in the U.S. rose an estimated 13% in the first half of 2022, The Wall Street Journal reported Wednesday (July 5), citing data from research firm Wards Intelligence.

Carmakers sold roughly 7.7 million vehicles in the first six months of the year, the report said, with General Motors, Hyundai and Honda seeing especially strong increases.

According to the WSJ, dealers and auto executives attributed the increase to demand from consumers who have spent years waiting out vehicle shortages, leading sales to recover more quickly than analysts had anticipated.

“Consumer confidence is still there, mostly because there has been that backlog of supply for so long,” Scott Kunes, chief operating officer at Wisconsin-based Kunes Auto and RV Group, told the WSJ.

The news reverses months of gloomy reports from the auto sector, which last year saw its lowest sales in more than a decade. The used car sector has had troubles of its own. For example, CarMax recently posted quarterly earnings showing a 17.4% decline in revenues.

But as noted here in May, the crisis in the auto sector could be one of the industry’s making.

“Auto sales are slumping due to multiple factors for which dealers may be responsible, including budget-busting price tags and a lack of available inventory due to macroeconomic pressures,” PYMNTS wrote. “No matter the cause, just as with other retail sectors, it may be a while longer before car merchants and manufacturers see a return to economic ‘normal.’”

The dealer-driven price increases could help explain why 64% of consumers said they were unlikely to buy a car in 2023 when interviewed for the January PYMNTS collaboration with LendingClub, “New Reality Check: The Paycheck-To-Paycheck Report.”

Cars were cited by consumers as unlikely purchases more often than any other major expenses that report tracked including leisure travel, gifts and luxury clothing.

For consumers who do not live paycheck to paycheck, things are different, as they’ve built up a savings cushion that has allowed them to continue to spend.

PYMNTS research has found consumers are dealing with inflation in three key ways: reducing the quantity of what they buy, switching to cheaper merchants, or buying lower quality goods. In some cases, they use a mix of these tactics.