Car Inventories Reach Five-Year High, Discounts Likely to Increase

According to Scott Painter, TrueCar founder and CEO:

Extreme weather conditions have caused dealer inventories to rise to their highest levels since 2009. With incentives on the rise, if you’re willing to brave the elements, the next 30-45 days will be an epic time to buy.

There has been evidence over the past several months that manufacturers have begun to offer aggressively priced discounts on vehicles, even popular models such as full-sized pickups. Cash-back deals, discounts and six-year financing have all become an increasingly greater part of the tools used to lure buyers. A month ago, Reuters reported:

General Motors Co is boosting discounts on full-size pickup trucks by thousands of dollars to keep pace with competitors and to whittle down bulging inventories on dealers’ lots. Dealers for rival Ford Motor Co, meanwhile, are also offering hefty discounts.

The Ford Motor Co. (NYSE: F) F-Series pickup was the top-selling vehicle in the United States during the first two months of 2104, with 102,418 units sold, up just 1% from last year. In second place, General Motors Co.’s (NYSE: GM) Chevy sold 65,510 Silverado pickups, but the figure was down 15% from the same period in 2013. Among other highly popular vehicles, sales of the Toyota Motor Corp. (NYSE: TM) Camry fell 17% to 28,998 during the first two months, and sales of Honda Motor Co. Ltd.’s (NYSE: HMC) Accord dropped almost 16% to 23,712. None of these manufacturers can prosper if their flagship products do so poorly.

Why sales have fallen is open to debate. One reason may be unusually poor weather. Another may be flagging consumer confidence brought on by still high unemployment levels and stagnant wages. And finally, and perhaps most worrisome of all, American car owners may have replaced many of their older cars with new ones. As cars last longer and longer, the sales cycle to replace older cars with newer ones may as well. If so, discounts will be around for a very long time.