U.S. new-vehicle sales in April are expected to fall 3.6 percent compared to April 2017, according to a Cox Automotive forecast.

However, despite the expected volume decline, the sales pace in the U.S. remains strong, at a seasonally adjusted annual rate (SAAR) of 17.3 million units, above year-ago levels.

In April 2017, the SAAR was 17 million.

“This year, April has two fewer selling days than last year, so sales volume can decline and the pace can increase,” said Cox Automotive Senior Economist Charlie Chesbrough. “That’s what we are expecting this month: volume of 1.37 million units, down 50,000 from last year, but a healthy sales pace of 17.3 million units, closer to last month’s robust 17.4 million pace.”

A record sales pace is within reach if reported sales come in stronger than forecasted. The highest seasonally adjusted annual rate for April – 17.5 million – was reached in 2016. The Cox Automotive SAAR forecast of 17.3 million units puts the record within reach.

However, beating the sales-volume record of 1.5 million units – set in 2005 – is unlikely, Cox Automotive noted.

The April sales volume of 1.37 million units is nearly 17 percent lower than March, according to Cox Automotive, which publishes Kelley Blue Book, Autotrader and other brands for vehicle buyers and sellers.

All percentages are based on raw volume, not daily selling rate. There were 24 selling days in April 2018, versus 26 in April 2017.

Crossover Popularity Could Push Jeep, GM, VW Higher

Cox Automotive forecasts that most OEMs will report lower year-over-year sales in April. However, the firm expects General Motors and Volkswagen to post modest gains over last year due to strong sales of new crossover models.

Cox Automotive said it also expects Jeep to post strong numbers thanks, in large part, to “fresh product offerings.”

“I expect another strong month from the Jeep brand,” Kelley Blue Book Executive Analyst Rebecca Lindland said. “The new products are driving strong sales and, considering FCA’s recent Q1 results, powering the bottom line as well. Of late, Jeep seems to be holding up the entire FCA tent.”

Consistent with a recent rend, Cox Automotive said it expects to see double-digit declines in car sales, as consumers continue to flock to SUVs. Large SUVs – especially those with three rows – are hot sellers.

Pickup trucks, thanks to robust incentive spending, continue at a solid year-over-year pace.

“The continued decline in sedan sales is obviously weighing heavily on many of the large OEMs,” noted Michelle Krebs, executive analyst at Autotrader. “Ford’s announcement yesterday that it plans to wind down sales of its core cars lines – Fiesta, Focus, Fusion and Taurus – is a bold and risky move.  It’s an indication tough decisions are being made.”

Vehicle Sales on ‘Sound Footing’

With the new-vehicle sales rate at or above 17 million units since last August, the automotive market appears to be “on sound footing,” Chesbrough asserted.

“Along with positive economic news, buying conditions remain strong with robust credit availability and aggressive OEM vehicle incentives, and these conditions are expected to remain through much of 2018,” Chesbrough added. “In addition, overall sales volumes have been supported by notable fleet activity, which is running above last year’s rate.”

Chesbrough, however, cautioned that there are many factors that could trip up the auto industry’s momentum.

Federal Reserve interest rate increases are starting to influence the economy, and auto loan rates have risen to levels not seen since 2013. Gasoline prices are rising again, crimping consumer spending power and vehicle ownership costs.

And, importantly, because of aggressive leasing strategies in recent years there are millions of “gently used” off-lease vehicles now available to consumers, providing growing competition for the new-vehicle market.

Even with significant headwinds, though, there is strong underlying support for healthy vehicle sales, Cox Automotive noted.

Gradual interest-rate increases have been expected and should not cause a large decline in affordability or overall market demand. Overall, economic conditions remain very strong, with high consumer confidence and low unemployment rates.

Importantly, tax reform is showing early signs of stimulating even more growth than initially assumed by Cox Automotive in December, when the legislation was passed. The current robust sales pace could drive a future upward revision of the Cox Automotive full-year sales forecast of 16.7 million units, the firm pointed out.