The Automotive Advisor Team

 

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. Our dealers are prepared to sprint, pace, hedge, run, and then sprint again when the trends dictate those actions. If you are unsure of how or when to move through these operational phases we can help. We will review the latest Automotive Market Updates that dealers can use to start off 2024 strong.

Automotive Market 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, 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.

Yahoo Finance reported: Source

“Americans are still shelling out, retailers insist, but sticking more to necessities and shrinking the boundaries of discretionary spending. 

We believe that cars are a need, not a want. Affordability as an issue for most consumers has built up a lot of pent-up “need” demand for a new more reliable car. That is why we see used cars growing and new cars as not growing, as confirmed by Cox’s forecast of flat or down 2% for new cars in 2024.

We are in a good spot. People need reliable cars for vacation and work commutes. They can’t afford to fly for vacation or buy a boat for leisure, but we can drive affordably every day.

Wholesales to Retail Trending:

Manheim 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%.

Black Book Index:  Source

      • Unlike the Manheim 3-year-old index, the Black Book 2–6-year-old index below shows a neutral value index for this earlier model inventory that is more affordable and in the price range of middle America.

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.

  • Cox Automotive vAuto Retail Market Index in yellow compared to the Manheim Market Index in blue shows the margins are still healthy by the gap between them. That is driven by the 2-year-old model continuing to decline in desirability and acquiring value due to their affordability and new car incentives that suffocate this late model higher priced used inventory. Source

 Summary:

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. This can be accomplished by being prepared to sprint, pace, hedge, run, and then sprint again to have your best year yet. If you are unsure of how or when to move through these operational phases we can help.

With our experience, insight, and proven plan:

    • Dealers reduce expenses that can come with the aging inventory.
    • Increase PVR by getting inventory at the right time to buy low.
    • Take market share from others who are overleveraged and aging.

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.

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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