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Cox Raises New Car Forecast for 2023 as Market Appears 'More Balanced'

It gears back its used car forecast but notes the resilience of buyers even with rising interest rates.

Row of cars for sale Credit/Shutterstock

Drivers have more cash than expected, allowing new car sales to show surprising strength and leading Cox Automotive on Tuesday to raise its forecast for the year.

Cox Automotive said it now expects 15.0 million new cars will be sold in 2023, up 9.2% from a year earlier. It also marked the second increase in its 2023 forecast. In January it forecast 14.1 million and in March it forecast 14.2 million.

Cox Automotive Chief Economist Jonathan Smoke said the year started with concerns about affordability, supply constraints and a fragile economy.

“But the jobs market has remained healthy, and consumers have found a way to buy new wheels,” Smoke said.

Jonathan Smoke Jonathan Smoke

“As we close the first half, the market is showing signs of being more balanced, with smaller, more predictable changes in sales and less news about big price changes,” he said. “A year from now, we might look back at this point as the beginning of a return to normal.”

Cox Automotive said it expects dealers will sell new cars at a seasonally adjusted annual rate of 15.2 million in June, up 16.3% from 13 million a year earlier, when new-vehicle inventory was less than half the current levels.

For the second quarter, new cars sold at a SAAR of 15.4 million, up 15.3% from a year earlier and up 13.2% from the first quarter.

For used cars, Cox Automotive forecast 35.7 million will be sold this year, down 1.7% from 2022. It said it expects retail sales of used cars to be 18.9 million, down 1%. The 18.9 million forecast reverted to its January forecast. In March it had dialed up expectations to 19.2 million.

A news release from Cox Automotive said key drivers of the new-vehicle market in 2023 are higher fleet sales and a vastly improved new-vehicle inventory, which in June was 70% greater than a year earlier.

Cox Automotive forecast fleet sales from January through June to be 40% higher than 2022’s first half, while retail sales are likely to grow only about 3%. Full-year retail sales were forecast to be 12.4 million in 2023, up 6% from 11.7 million in 2022.

“The resilience of vehicle buyers in the face of historic increases in interest rates has been surprising,” Cox Automotive Senior Economist Charlie Chesbrough said.

“However, maybe less surprising, but more than we expected, has been the industry’s return to old habits to move the metal,” Chesbrough said. “We expect that headwinds will grow in the second half of this year as credit availability and unfulfilled demand become scarcer.”