The Automotive Advisor Team

Economic Outlook: Source

Taxpayers can normally expect to receive a refund within 21 days if they file electronically and choose direct deposit, the IRS said. But by Feb. 9, almost two weeks into tax filing season, the IRS had issued more than 7.4 million refunds. In comparison, the IRS had sent out over 13.3 million refunds by Feb. 10, 2023. Tax season last year started six days earlier, however, on Jan. 23, 2023, the IRS had nearly a week longer to process tax returns and send refunds.

The average refund size is also down 12.8%, from $1,997 for 2023’s tax season through Feb. 10, to $1,741 for this season through Feb. 9 but if a taxpayer’s wages did not grow to meet the 7% inflation growth rate, or file for child tax credits will see up to a 7-% increase in their refunds.

Used Car Optimizer Program: Inventory Value Analysis:

Video Explanation on how we use weekly inventory value trends to forecast the market with our clients to buy the cars they need and not overpay but also not miss deals either.

Segment

Sub Segment

Price Point

Wholesales to Retail Trending: Source

The wholesale market continues to show signs that the Spring market is on its way but taking its time. Three-year-old wholesale values increased a modest 0.2%, lane efficiency was relatively flat, and sale prices are a little under MMR. Used and new retail sales are still strong compared to most previous years. Days’ supply for used lower than average. New car days’ supply generally increasing as inventory grows.

  • Week over week three-year-old values increased 0.2%. Luxury increased 0.1% and non-luxury increased 0.2%.
    • Sale prices are still slightly below MMR (-0.59%).
  • Lane efficiency is relatively flat week over week.
  • Retail prices dropped some last week, and spreads continue to drop due to stabilizing wholesale values and dropping retail prices.

Retail Sales Market Outlook: Source

  • Used retail sales stronger than most previous years. At 42 days, days’ supply lower than typical levels.
  • New car sales continue to trend higher than some previous years, but inventory also continues to build. Days’ supply at 77.
  • Shown in the three graphs below the vehicle inventory supply is up from last year but still down significantly from 2019 and 2022 numbers and that’s having a tremendous impact on the sales availability of inventory while the vehicle sales pace is picking up shown in the second graph below.
  • The final graph shows that the retail price is starting to make a shift towards matching the acquisition cost but that usually takes a few more weeks of lead time and we’ll create margin compression in the interim.

As you can see below the cost of inventory in the dotted black line is trending faster than 2019 and the retail price is trending to 2023 so that shows margin compression greater on the retail side than we have seen before. The retail price should begin to strengthen over the next few weeks but keeping to the right expectations is critical to feeling confident in keeping the retail engine running.

 

The sales shown above in the first few months of the year have impacted the availability of used retail listings in the market. Its net effect will be dealers struggling to find new inventory to replace the inventory being sold and drive up the price of acquisition.

Summary: Source

We are starting to see sales rate and acquisition costs mirror prior years going into tax season. With the IRS being almost 40% behind prior years in refund disbursements, we can expect the best sales weeks are still ahead of us. With that being in mind looking at the used car volume of inventory available in the market, as shown by black book below, you can bet the prices will rise faster than we expect and what you think is overpaying today for inventory will be underpaying tomorrow.

 

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

Author: John Ellis

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

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