This week on David Long’s All Things Used Cars program we reviewed the Economy, how it will flow in the first half of 2024 to impact our Automotive Used Car retail business and how we can follow the used car market trends to hedge volatility and grow market share as the insights recommend.
All Things Used Cars Economic Outlook: Source
- In 2024 the real GDP growth and the pace of job gains are expected to remain positive, and inflation is expected to decline to around 2.5% further evidencing the speculation of a soft landing.
- The labor market is predicted to cool and monthly job gains are forecast to hit around the 100,000 mark after being more than double that for much of 2023.
- The unemployment rate could tick up to 4.2% or so from its current 3.7% level.
- One good sign is that productivity has picked up recently, reaching the 4.7% level in the third quarter and advancing at a 4% rate in the past six months.
- Because of all that, as we have mentioned before, the Fed said it’s probably done hiking rates to fight inflation and is penciling in three rate cuts in 2024, a strategy that would lower borrowing costs for consumers and businesses. Inflation has slowed more dramatically than expected, validating the Fed’s turnabout.
Wholesales to Retail Trending:
Manheim Used Car Index: Source
- Over the last two weeks, MMR prices declined 0.7%, which was more than the normal decline for the time of year.
- Over the first 15 days of December, MMR Retention, the average difference in price relative to current MMR, averaged 99.0%, indicating that valuation models are ahead of market prices.
- The average daily sales conversion rate of 54.7% in the first half of December was above the December 2019 daily average of 52.2%. The conversion rate indicates that the first 15 days of the month saw stronger-than-normal buying demand for this time of year.
- All major market segments saw seasonally adjusted prices that remained lower year over year in the first half of December. Compared to the industry’s year-over-year decline of 6.3%, SUVs lost less at 5.4%, and pickups lost 5.9%.
Retail Market Outlook: Source
- According to Black Book, the Used Retail Prices are more accessible than in years past, due to the proliferation of ‘no-haggle pricing’ for used-vehicle retailing. Transparent pricing upfront makes the car buying process more enjoyable for customers and allows Black Book to accurately measure retail market trends.
- This analysis is based on approximately two million vehicles listed for sale on U.S. dealer lots. The graph below looks at 2-6-year-old vehicles. The Index is computed keeping the average age of the mix constant to identify market movements.
- The Used Retail Days-to-Turn estimate is now sitting around 61 days at the end of 2023.
Used Car Market Summary: Source
We are not in a market for the unprepared or timid. The next few months could determine a dealer’s profitability for the entire year. Using the experience of trusted partners who have relevant insights to forecast, and pivot will ensure you take market share by being prepared to sprint, pace, hedge, run, and then sprint again to have your best year yet.
For a discussion about your strategy, a demo of our Used Car Optimization Program or to become a client of our market and rooftop economic operational retail consulting, reach out HERE.