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Mixed June Sales Forecasts Mean Buyers Should Wait

The final numbers for June auto sales aren’t out yet, but analysts are forecasting a mixed bag.  According to Edmunds, Chrysler, Ford, GM and Nissan are expected to beat their June 2010 sales, but Honda and Toyota should see their June 2011 sales fall compared to the same month a year ago.

Part of the reason for the mixed bag is inventory problems. “I was looking at the actual number of vehicles available for sale on dealer lots,” writes Jeremy Anwyl of Edmunds. “The number stopped declining in the last week of May, but still has not started to increase. For some models, it was even still dropping (good luck getting a Toyota Prius). The inventory situation is significant.  Prices were starting to drop by mid May, but that movement has mostly stalled. Some prices have even increased – a trend that is not good for sales.” Earlier in June, analysts, including Anwyl, had predicted that prices would start to decline in June, with the trend continuing throughout the summer.

Despite year-over-year sales declines predicted for Honda and Toyota, those two brands have boosted their incentive spending. Edmunds reports that compared to May 2011, Toyota spent 30.5 percent more on incentives in June. Honda spent 4.1 percent more. “By kicking up their incentive spending, Toyota and Honda are sending a clear message that production levels are starting to return, even if those vehicles haven’t yet hit dealer lots,” said Jessica Caldwell, director of industry analysis at Edmunds.com. “Honda, for example, introduced its ‘Honda Promise’ program which lets car buyers lock in incentives on a new car now, even if the car can’t be delivered for another several weeks. With this program, Honda is not only demonstrating a confidence in its recovery, but also making a strong play to protect its market share.”

The analysts at TrueCar report that overall transaction prices in June 2011 rose 2.9 percent ($845) compared to June 2010 and 0.8 ($244) percent compared to May 2011. “The upside to a lack of inventory on some vehicles is that incentives decreased and transaction prices soared to the highest levels ever recorded – meaning stronger profits for automakers,” said Jesse Toprak, VP of Industry Trends and Insights for TrueCar.com. “As dealer inventory levels are replenished and supply levels return to normal, incentives will begin to increase, lowering transaction prices.”

TrueCar estimates that Honda spent 4.5 percent more on incentives in June 2011 than in May, while incentive spending from Toyota rose 9.3 percent in June. That’s a big difference compared to the 30.5 percent rise Edmunds reported. “The Japanese automakers rebounded from slower sales this month as inventory levels improved and offered generous incentives to keep from losing loyal customers,” said Kristen Andersson, automotive analyst at TrueCar.com. “Despite the relative increase in incentives from Toyota, they still have the lowest average transaction price to incentive ratio, but they may need to be more aggressive in coming months to regain lost market share.”

As industry analysts try to work out the final numbers for June sales, there’s one clear takeaway for consumers: waiting to buy a new car is the smart thing to do. Inventories are still tight and incentive spending is low. Wait a few months to buy and prices should go down, saving you money. If you must buy now, check out this month’s best car deals to see what discounts and incentives are available.

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