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Stable Interest Rates Amid Ongoing Suffering in the Dealership Sector

Economic experts issue cautions as interest rates remain steady between 4.25% and 4.50%, citing potential for decreased growth, increased inflation, and stricter credit conditions. For the time being, retail earnings seem stable, but finances continue to present difficulties due to...

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Steady Interest Rates Maintained, Yet Persistent Agony Among Dealers Remains Steady
Steady Interest Rates Maintained, Yet Persistent Agony Among Dealers Remains Steady

Stable Interest Rates Amid Ongoing Suffering in the Dealership Sector

In the U.S., new-vehicle sales for June 2025 are projected to reach around 1.27 million units, marking a moderate pace slightly lower than the peak sales seen in March and April this year. The seasonally adjusted annual rate (SAAR) for June 2025 is expected to be around 15.3 to 15.6 million units [1][3][4].

Compared to June 2024, the June 2025 SAAR of approximately 15.3 million units represents a 2.3% to 2.5% increase year-over-year. However, this growth is somewhat overstated, as June 2024 sales were artificially depressed due to a major dealership software outage that limited sales by around 85,000 vehicles [2][3].

The strong sales in March and April 2025, fuelled by consumers rushing to purchase ahead of tariff hikes, have led to a "payback effect" in June, where sales appear milder because some demand was pulled forward [2][3]. Without these tariff-driven sales shifts, June 2025 sales might have aligned closer to a 16 million unit SAAR, suggesting a more robust demand underlying the reported figures [3].

Key factors influencing the sales landscape include inflation and interest rates, tariffs, and default risks and economic uncertainty. Inflation and interest rates continue to pressure new vehicle affordability, with expectations that cost concerns will intensify in the second half of 2025, potentially dampening demand and upward pricing adjustments [1].

Tariff-related disruptions have caused vehicle production shifts and inventory fluctuations. While inventory peaked early in 2025, it has declined through mid-year due to strong early sales and ongoing supply chain adjustments related to tariff impacts [3]. Default risks and economic uncertainty have contributed to a cautious sales outlook [1].

Retailers are expected to benefit from robust pricing, with profit per vehicle (including F&I income) projected to reach $2,380 in June. However, lenders are tightening credit standards in response to rising default risks and broader economic uncertainty [1].

Despite the muted sales pace, consumers are on track to spend nearly $45.0 billion on new vehicles in June, a 4.3% increase from a year ago and the fourth-highest on record for the month of June. Used-vehicle loan rates have climbed to 14.18%, nearly reaching the 25-year peak recorded in February [1].

According to projections by J.D. Power and GlobalData, new-vehicle sales in June 2025 are forecast to hit 1,247,900 units, marking a 2.5% year-over-year gain, but adjusting for fewer selling days, actual performance reflects a 5.4% decline [1]. June 2025 retail sales of new vehicles are forecast at 1,016,800 units, reflecting a 6.7% increase compared to the same month last year, but a 1.5% decline when adjusted for selling days [1].

U.S. Federal Reserve Chair Jerome Powell announced that interest rates would remain steady within the 4.25%-4.50% range, as of the article's date [1]. Second-quarter sales are projected to rise 2.5% year-over-year to approximately 4.18 million units [1]. Incentive spending is climbing modestly, with automakers forecasted to offer an average of $2,727 per vehicle, up slightly from both the prior month and June 2024 [1].

[1] Cox Automotive [2] J.D. Power [3] GlobalData [4] National Automobile Dealers Association (NADA)

  1. The growth in new-vehicle sales in June 2025, compared to June 2024, is attributed to several factors such as inflation, interest rates, tariffs, and economic uncertainty, which influence the finance and business landscape, particularly in the personal-finance and wealth-management sectors.
  2. With a SAAR of around 15.3 million units, the increased sales in June 2025 can be viewed as a result of investing in the technology and infrastructure of the automobile industry, leading to improved vehicle production, distribution, and consumer purchasing habits.
  3. Despite the decline in sales for June 2025, retailers in the industry are experiencing robust pricing, boosted by factors such as F&I (finance and insurance) income, contributing to a positive shifting of their overall lifestyle and financial outlook.
  4. With tariff-related disruptions causing inconsistencies in vehicle production and inventory, the technology sector remains an essential component for businesses in adapting to these challenges, ensuring better efficiency and predictability in managing their operations and maintaining profitability in an ever-evolving marketplace.

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