Sell ’em if you got ’em might be the mantra for sellers of new and used vehicles in May. 

New vehicle sales are expected to rise 20.3% in May due to an influx of inventory. Used cars are expected to fall.

New vehicle inventory levels rose last month and sales are expected to follow suit — at double digit levels, according to analysts at Cox Automotive. The group says May’s seasonally adjusted sales rate (SAAR) will be strong on a year-over-year basis, rising 20.3%, but lag April’s numbers: 14.9 million versus 15.9 million.

The primary driver for the strong sales results for the past two months: having more new cars, trucks and SUVs on dealer lots. Last year at this time, there were just 1.1 million vehicles available — well below the norm. However, current levels are hovering around 1.9 million vehicles, which is an increase of 70%.

“New-vehicle sales will show strong gains this month over last year’s levels, and on the surface, this is a bit surprising,” said Cox Automotive Senior Economist Charlie Chesbrough. 

“Interest rates are substantially higher than a year ago, as are vehicle prices, and yet sales will increase year-over-year. The reason? Vehicle shoppers now have a much better chance of finding something that fits their needs. Pent-up demand, held back by limited product availability last year, is now being fulfilled as inventory levels improve around the country.”  

Will the good times roll?

While the first half of the year has been a good one for automakers and dealers, Cox predicts the second half of the year is likely to be more difficult. 

“Economic headwinds have not subsided and are expected to slow the vehicle sales recovery, although more incentives and more fleet volume will continue to support overall sales volume,” the company said in a statement.

May is going to see big numbers not only due to increased inventory levels, but also it features a major holiday: Memorial Day weekend. The year’s fifth month typically enjoys big sales numbers as potential buyers get an extra day to look around, check numbers and make decisions.

Used car problems

New vehicles seem to be seeing nothing but green lights, meanwhile, used car inventory levels are down, driving prices up so expect sales to be affected, according to analysis by Grand Rapids, Michigan-based ZeroSum, which tracks and predicts vehicle inventory levels.

The used car market’s looks to be a textbook case for the law of supply and demand. As long as prices of new vehicles remain at or near record levels with an average transaction price about $49,000, buyers looking to save a few bucks ae turning to the used car market.

Used car inventory was at 1,767,684 at the beginning of May, a 4.07% increase in availability from the beginning of April 2023. However, ZeroSum predicts after four straight months of increased inventory levels, used car stores are expected to be at 1,762,346 for May EOM, a drop of 0.1% from April EOM. 

As inventory levels continue to drop — supply — demand is going to continue to rise, driving up prices in the process. 

Used car prices rose in May — the second straight month — up 1.34% from April. The average price of a used vehicle is now $31,215. While month-over-month numbers are up, the average price is down significantly from last May, when the average used car price was $33,736. Used vehicles were much more expensive last year because there were fewer new vehicles for sale due to supply chain issues and rising materials costs.

Although sales are on the rise now, the economic issues expected to impact new vehicles will trickle down to the used vehicle market, ZeroSum warned in its monthly report.