The Automotive Advisor Team

Economic Update: Source

The second-quarter real GDP increase was revised down to a 2.1% annualized increase from the 2.4% originally estimated. Despite low levels of lost pay, workers are still feeling a little uneasy, with high-income workers especially likely to say they expect employment income losses in the coming weeks.

  1. Economic growth still gained; consumer spending accelerated.
  2. August job growth surpassed expectations: prior numbers were revised down.
  3. Vehicle buying plans declined from June but were up year-to-year.
  4. Workers 25-54 held steady on the employment-to-population ratio above both the pre-pandemic levels.

 

 

New Sales Trends: Source: Cox Auto

 New car sales saw a Spike. As shown in the graph below over the last four weeks new car sales have spiked and are now softening. Following the 2021 and 2022 sales pattern, it looks like a steady pace of new car sales for the rest of the year. Allocation is out but the UAW strike may put a damper on that. Watch this throughout the rest of the quarter to determine strategy.

 

 

Days of supply stood at 58 at the start of September, about the same level it has been at for most of the year and up 46% from a year ago.

 

Used Supply Trends: Source: Cox Auto

 Used car sales have been steady sales since mid-March. We had some volatility in early buy what I’m well my friends seen a steady increase in sales since then. 

 

 

Wholesale Market’s Current State Source: Black Book / Manheim

Looking below the wholesale market is starting to stabilize for the three-year-old MMR index and that’s a good thing for the market. Rising and decreasing evaluations in that channel can create acquisition and aging havoc. A little further down is the depreciation index showing that one to three and four to six-year-old models are not depreciating as fast as 7 to 10-year model year vehicles. Keep an eye on your aging strategies there. Finally, the bottom graph shows the two to six-year-old vehicle Black Book Index is starting to stabilize as well which indicates the entire wholesale channel is starting to balance out. All of this can be thrown out of that balance with the UAW strike. We will keep an eye on that.

 

 

Wholesale / Retail Spread PVR

Looking below at the week-a-week comparison in the wholesale and retail spread index, it shows the decline in the margin that we saw two weeks ago started to subside with the flatlining cell value increases. The overall market last week had a spread of $3038 compared to this week’s 2969 for a decline of $69 week over week.

 

 

Summary:

This week we’ve seen continued volatility in the automotive market. With the instability of used car valuations boosting the retail and the wholesale side, continuing to take a week-to-week stance in your acquisition strategy is imperative to keep balance. Making sure watching UAW is paramount to how we proceed over the next couple of weeks not only in vehicle acquisition planning but pricing, aging, and disposal strategies as well. The good news is for now the market has stabilized and fluctuations are at a minimum. Time will tell how long that will last.