The Automotive Advisor Team

Economic Outlook: Source

As the Automotive Market Indicators below show, The U.S. economy will “avoid a recession and move forward with slow, constrained growth,” Smoke says. The Fed is keeping interest rates high, but lenders have begun to let them come down slowly. That, combined with “elevated-but-declining inflation,” will “combine to limit consumer spending and slow job and income growth,” he explains.

Economists think the labor market will weaken, “but unemployment levels shown below will remain low enough to support a healthy auto industry,”

The consumers are feeling more confident as shown in the graph below with some help from the gas prices. The good news is simply that the blue line, representing the index of consumer confidence, is growing and higher than it has been at any other time this year.

Wholesales to Retail Auto Market Trending:

While the 2024 3-year-old model mix (2021 model year units selling in 2024) stabilizes for our index weighting, Manheim will be using 2023 Q4 results to establish the mix of vehicles for roughly 4 to 6 more weeks.

  • Week-over-week values decreased 0.4%. Luxury depreciated 0.7%, while non-luxury decreased 0.3%
  • Sale prices continue to run below MMR (-1.23%) but improving.
  • Three-year-old lane efficiency is slightly lower than most previous years while 6-year-old lane efficiency is slightly higher than in previous years.
  • Week over week non-luxury retail values decreased 0.6% and luxury decreased 0.7%.
  • After a strong December month-end, used retail sales started the year relatively strong. Days’ supply at 47 days.
  • New car sales started the year at a typical pace and days’ supply is currently at 74 days.


  • Manheim Index: Source

    In December, Manheim Market Report (MMR) values saw above-average weekly declines in the final two weeks of the year. Over the last four weeks, the Three-Year-Old Index fell 1.4%, indicating values were falling faster than normal. Those same four weeks delivered an average decline of 0.5% between 2014 and 2019.

The first week of 2024 is now in the books, with no big change in how we finished 2023. We did see more attendees at the auction later in the week but still saw more If’s and no sales in the lanes overall. Wholesale prices are still all over the place, sending mixed signals to buyers and sellers who seem not quite sure what is happening with the current market. We did see a small uptick in the auction conversion rate this week, is this our first positive sign for 2024?

Retail Auto Market Outlook:

NADA Guidance: In 2024 we expect new-vehicle inventory will continue to rise, as the industry leaves the chip shortage in the rearview mirror. High interest rates for new and used-vehicle finance contracts will be a headwind for vehicle sales, offset somewhat by higher incentive spending by OEMs. But there is the potential for some interest rate relief later in the year if the Fed chooses to cut rates in the back half of 2024. We believe new vehicle sales will increase slightly in 2024. Our forecast for new light-vehicle sales in 2024 is 15.9 million units.

Looking at the wholesale to retail spread below measuring the autos retail market index in orange versus Manheim’s used vehicle value index in blue you can see that the profit margin represented by the thick green arrow between the two lines is still healthy and strong. Also notice the average retail price has now moved into a 2021 model year moving away from the 2020 model year as we enter a new year. That is also represented in the retail market index average retail price of $32,887.00. That inventory is starting to see a slight stabilization and appreciation in the used car market shown by the nonluxury blue and orange lines to the right. Staying within this profit margin gap will have everything to do with buying the rice price-band of inventory to match your market demand for price and segment to keep the average days of sale low on your lot.

Auto Market Summary: Source

Shown below, from the 2024 forecasting webinar held by Cox automotive this week, their projections for new car retail sales are flat and for used car retail sales relatively flat but possibly up a little. They are also projecting the Manheim used vehicle value index for the three-year-old model will grow in acquisition value over the full year by half a percent. You can see that in the bottom right quadrant. Most analysts are projecting a decrease in used vehicle values over the year 2024 but I think Cox gets it right here.

Affordability will drive retail sales in of vehicles that are affordable to consumers. That will keep the price stable. We also have to take into account that 2020 and 2021 new cars were not be built. Those would be fueling our used car retail market supply today. They’re just not there. With aging inventory in operation approaching 14 years old with an average of 70,000+ miles, reliable affordable vehicles will drive the retail demand more than new car incentives. 

No one has a crystal ball, and we certainly aren’t always right, but at The Automotive Advisor Team, our predictability has been accurate and reliable and saved our dealer clients hundreds of thousands of dollars on their P&L. Reach out HERE and let us know if we can help you forecast 2024 and have your best year ever.

John Ellis CEO & Founder of The Automotive Advisor Team, LLC

Author: John Ellis

Founder & CEO The Automotive Advisor Team, Inc. BEVEveryting, Inc. Double E Consulting, Inc.

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