The Automotive Advisor Team

Current Automotive Economic Outlook: Source

  • The headline unemployment rate declined to 3.5% from 3.6% in June to return to the pre-pandemic unemployment rate. The labor force participation rate was steady at 62.6%.
  • The underemployment rate, the broadest measure of unemployment, declined to 6.7% from 6.9% in June and is lower than before the pandemic.
  • Monthly average hourly earnings growth was stable at 0.4%. Earnings growth year over year was also steady at 4.4%. Initial jobless claims are higher than a year ago and higher than before the pandemic began


New Car Market’s Current State:

The average price Americans paid for a new vehicle in July 2023 was 0.4% higher than one year ago, the smallest year-over-year price increase in the last decade. According to Kelley Blue Book, a Cox Automotive company, the average transaction price (ATP) of a new vehicle in July was $48,334, a month-over-month decrease of 0.7% ($337) from June’s ATP of $48,671, and up only $199 from one year ago. Compared to the start of the year, transaction prices are down 2.7%, or $1,335, the largest January to July tumble in the past decade. Automakers spent on average 5.5% more on incentives in July to an average of $2,148 per vehicle, up 83% from last year. Incentives as a percentage of average transaction price increased to 4.4%, the highest level since September 2021.


Used Car Market’s Current State:

Used vehicle sales increased in July as customers prioritized affordable car prices and inventory normalized from 2022’s volatile market conditions. According to Cox Automotive, purchases from retailers rose 6% from June to their highest point since February, putting used vehicle sales just 0.5% behind last July when the market was still profiting from OEM production constraints. This small but helpful surge in demand softened the impact of falling used prices which declined an average of 1.6% month-over-month and 11.6% year-over-year. The last graph shows line efficiency for both three and six-year-old vehicles have been increased from its low of 40% to almost 60% which means cars are selling faster in the lanes. This has implications for wholesale values and sales rates. Keep an eye on these trends over the next few weeks.


Wholesale Market’s Current State

Depreciation continues to decelerate for the 3-year-old index; down 0.1% to 95.2%. Non-luxury was flat, and luxury decreased by 0.5%.  Depreciation decelerated for all model years.

  • Sale prices continue to run below MMR but improving (-1.43%).
  • Lane efficiency increased for both 3-year-olds and 6-year-olds.
  • Retail values decreased by 0.7% for both non-luxury and luxury. Six-week lagged spreads continue to improve but will likely plateau if wholesale depreciation subsides.

Retail Profit:

The wholesale value continued to decline for all model year vehicles with the older models declining less. The average spread is consistent for most model years and both the $ value spread and % spread are getting bigger. However, the 2-3-year-old used cars most impacted by the pandemic and in shortest supply is the high spread earner this week, and rightfully so. This age segment should see steady price strength for years to come.

  • The 1-Year-Old (2022 MY) spread % is up .3% over last week.
  • The 3-Year-Old (2020 MY) spread % is 1% over last week.
  • The 5-Year-Old (2018 MY) spread % is .2%over last week.

F&I Market Current Outlook

The average used-vehicle loan in the first quarter ran 67 months, financed $26,420, and had a 116 percent loan-to-value ratio, according to Experian.

“Affordability issues drove demand toward used vehicles because of low inventories, which bolstered prices within the new vehicles arena,” National Association of Federally Insured Credit Unions economist Noah Yosif said in a statement when asked about Credit Union Leasing of America’s findings. “Now, as supply chains improve and production increases, prices will come back down which should ease affordability pressures while also providing more options among used and new vehicles. Non-market factors such as rising interest rates will take longer to resolve, which is why credit unions are seeing increased demand for longer loans and high [loan-to-value] ratios; however, these issues are also expected to abate as the Fed realizes further progress on inflation.”



The auto market is starting to create stability through demand and supply. With the labor force showing continued strong signs of employment and wage growth, consumers are paying off debt and upgrading their current assets including vehicles. With the increase in OEM incentives new cars are staying steady on the sales side and the supply side, which is good for the youth car department.

On the wholesale side, we’re starting to see a stabilization in wholesale price declines and should see a discontinuation of those declines in the coming weeks. Will that continue through the rest of the year and start showing modest increases in wholesale vehicle prices, we’ll have to wait and see but it’s certainly not out of the question.

Reach out to the automotive advisor team to discuss this report and what it means to your retail operations specifically. You can reach me at John at the automotive advisor You can reach any of our teammates at info at the automotive advisor and in the subject line designate your specific department of interest.