This year, car shoppers will have something more to celebrate than just the unofficial start of summer. This Memorial Day weekend could bring some lucrative deals on new cars.
That's because dealers are going to have a tougher time showing sales increases in May, and the holiday weekend is their last chance to move a few last cars off the lot.
This May has one fewer car-selling weekend than last May. Even when fewer selling days are taken into account, major forecasts of May auto sales aren't painting a rosy picture. While together they project modest increases in adjusted sales, likely 1% to 4% compared with last year when the calendar differences are taken into account, auto shopping site TrueCar is predicting sales to individual customers will be down 4.5%. With individual sales being the most profitable in the industry, automakers are going to have to roll out special incentives to turn the month into a winner.
With dealers hungry for sales, car buyers may gain the upper hand in negotiations.
"If you are really trying to get the best deal possible, technically the month closes on Tuesday, the 31st," says Alec Gutierrez, senior analyst for Kelley Blue Book, which tracks prices. It may pay to "sneak away from work to close a deal on Tuesday."
Automakers are making it easier with lucrative incentives on cars. Incentive spending — discounts in various forms — is averaging an estimated $3,034 per vehicle this month, up 7.1% from a year ago, reports TrueCar.
The best deals will likely be on cars instead of SUVs and pickups.
"Along with this month's abbreviated selling period, automakers have to adapt to weaker demand for midsize and small cars as relatively cheap gas entices more consumers to update to crossovers and pickups," says Eric Lyman, vice president of industry insights for TrueCar, in a statement.
As a result, automakers are rolling out different sales gimmicks for the holiday weekend. Fiat Chrysler, for instance, is offering an extra $1,000 off a new Dodge Charger sedan. Kia is offering 0% financing for up to 66 months. And Ford is offering both 0% financing and cash inducements on various models.
"So far, this looks like it is going to be our biggest sale," says Bert Boeckmann,
whose family-owned Galpin Ford in Los Angeles is the nation's largest Ford dealer. Dealers say a number of factors are coming together that could give them a last-minute boost that will allow them to exceed expectations:
• Economic indicators. Unemployment is low and consumer confidence is high compared with the past few years. Retail sales picked up 1.3% in April, their biggest rise since March 2015.
• Easier credit. After tight borrowing policies during the recession, lenders are being more generous. Experian just reported that the total balance of open automotive loans rose 11.1% the first quarter of 2016, passing $1 trillion for the first time. “Automotive financing certainly has started off the year with a bang,” said Melinda Zabritski, senior director of automotive finance for Experian, in a statement.
• Aging fleet. The combined age of all passenger vehicles still in use hit 11.5 years last year, IHS Automotive reports. Dealers say they see their shares of customers dragging in their jalopies. "The old buggy is just worn out and (customers come) seeking the best deal they can," says Pete Greiner Sr. of Greiner Ford Lincoln in Casper, Wyo.
For those who miss the Memorial Day sales, take heart. The summer could bring more discounts, experts say.
"The summer will flush out more incentives from automakers," says Jessica Caldwell, director of industry analysis for Edmunds.com
