The Automotive Advisor Team

Economic Outlook: Source

Consumer sentiment in the U.S. has improved much more than anticipated in January, according to preliminary data released by the University of Michigan on Friday. The University of Michigan said its consumer sentiment index surged to 78.8 in January after jumping to 69.7 in December.

The University of Michigan’s report also showed continued decreases in both year-ahead and long-run inflation expectations. Year-ahead inflation expectations slipped to 2.9 percent in January after plunging to 3.1 percent in December, hitting the lowest level since December 2020.

 

Wholesales to Retail Trending: 

 Wholesale depreciation was the same as the previous week, with 3-year-old models falling 0.3%. Sale prices dropped lower compared to MMR and lane efficiency declined as well. Used and new retail sales were lower than in most previous years, pushing up days’ supply. 

 

              Manheim: Source

  • Week-over-week values decreased 0.3%. Luxury depreciated 0.5%, while non-luxury decreased 0.2%
  • Lane efficiency dropped week over week. Another negative movement is likely due to the weather.
  • Week over week non-luxury values decreased 0.7% and luxury decreased 0.8%.
  • Used retail sales trending below most previous years. Days’ supply at 47 days.

     

        Black Book: Source

  • The depreciation continued to slow last week, with the overall market depreciation falling below half a percent; this is the first since mid-October of last year.
  • The most notable market stabilization is occurring in the 8-to-16-year-old age bucket which reported an average decline of -0.35%, compared with -0.49% for the 2-to-8-year-old vehicles.
  • On a volume-weighted basis, the overall Car segment decreased -0.37%. For reference, in the previous week, cars decreased by -0.39%.
  • The estimated Average Weekly Sales Rate dropped slightly to 54% as sellers started to adjust floors to reflect the stabilizing market.

Inventory is starting to move back towards appreciation in certain sub-segments. We expect to see that continue in certain price bands and segments in the coming weeks.

 

Retail Sales Market Outlook: Source

According to Cox Automotive estimates based on vehicle registration data, total used-vehicle sales in December finished near 2.6 million units, up 2.1%, around 54,000 units, from December 2022. Used retail sales are estimated to have finished December near 1.4 million, up 2.6% from last year’s volume, or just over 35,000 units.

The average used vehicle listing price was $26,446 at the end of December, up from $26,226 at the end of November but down 3% from a year earlier. Source

As you can see below the wholesale to retail spread is starting to move closer together because the acquisition price of inventory in the market is gaining ground ahead of tax season. We expect this trend to also continue at least through March. 

 

Retail Supply Market Outlook: Source

 Throughout the fourth quarter, we saw a steady level of weekly used sales and ended the year with estimated sales running about 2% higher compared with 2022,” said Cox Automotive’s Jeremy Robb. “For the full year, we estimate sales for used retail were down about 3%, curtailed by a constrained supply of newly used vehicles into our ecosystem.” “Looking ahead, the retail used-vehicle market should continue to feel the pinch of lower new-vehicle sales in 2021 and 2022, keeping supply constrained.” The average used vehicle listing price was $26,446 at the end of December, up from $26,226 at the end of November but down 3% from a year earlier.

 

  1. Used-vehicle inventory rose to 2.39 million units at the close of December.
  2. Used days’ supply stood at 56, the same as in November.
  3. The average used vehicle listing price increased slightly but remained well below $27,000.

 

Summary: 

To many, January feels slow, and December felt like it didn’t have the momentum we saw in prior years. But, the numbers show the opposite. Smaller markets take longer to ramp up as we know but looking at the trends and insights in automotive and the KPIs of the economy, we seem to be headed towards a pretty good tax season and an even better second half if the feds cut rates. 

 

Don’t let the feeling of slowness of the market early on constrict your thinking and get you behind pretax inventory levels. There is a balance and that can be difficult to measure. Reach out to the team to discuss how to find your balance and set your preparedness for an aggressive growth strategy.

 

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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