October sales seen up 5.4 percent

October is typically a slower month for new vehicle sales, but Kelley Blue Book is calling for sales to climb by a healthy 5.4 percent this month.

With just a few more selling days left in the month, KBB is predicting that new car sales will climb 5.4 percent to 1.27 million units in October. That total would net a seasonally adjusted annual rate (SAAR) of about 16.3 million units, or the same level seen in September 2014.

Those results would be positive for the industry as a whole as October is typically one of the weakest selling months of the year, trailing on January in average sales volume. However, it appears as though mounting incentives could be fueling those higher sales, which could be bad for the industry over the longer term.

“One cause for concern is the rising levels of incentive spend in the industry, which in recent months has drifted close to an average of $3,000 per vehicle,” said Alec Gutierrez, senior analyst for Kelley Blue Book. “The ratio of incentive spend to average transaction prices is at its highest since 2010, but remains below pre-recession levels. Since inventory levels have remained consistent, this isn’t a red flag quite yet, but it does underline that the natural industry growth we’ve had in recent years is slowing.”

KBB expects most of the major automakers to post sales gains during the month of October, although Ford is penciled in for a 3.3 percent drop in volume. The compact SUV/Crossover segment will remain the hottest segment during the month, with October sales predicted to grow 13.6 percent to 159,000 units.