The Automotive Advisor Team

Automotive Market Update 7-11-2024: Is Santa on his way??

 

Economic Source

Could we have an early gift to open before Christmas this year? The outlook for that happening is getting more likely after today’s Inflation announcement.

In a better-than-expected report, consumer prices declined 0.1% from May’s 3.3% to June being 3.% Thursday. It was the first monthly decline in overall inflation since May 2020, when the economy was paralyzed by the pandemic.

June, gas prices plunged for a second straight month, tumbling 3.8% on average nationwide from May. Gas prices are now down 2.5% from a year ago. (They did pick up this month and averaged $3.54 nationwide Thursday, according to AAA, up 10 cents from a month earlier.)

Grocery prices ticked up by a slight 0.1% last month, the first increase in five months, and are just 1.1% higher than a year ago. Food prices are still up, on average, 21% from March 2021, when inflation started to surge, although Americans’ average wages have also risen sharply since then.

Manheim Retail & Wholesales Market Source

The wholesale market continues to stabilize as three-year-old wholesale values dropped only 0.2% for the second week in a row. Lane efficiency decreased slightly due to the holiday week but is running ahead of the last two years. The CDK cyberattack continues to impact our retail sales data and causing us to underreport activity.

  • The 3-year-old index depreciated 0.2% to 96.2%. Both non-luxury and luxury depreciated 0.2%.
    • Wholesale values dropped for most model years.
    • Sale prices still below MMR (-1.33%).
  • Lane efficiency decreased slightly during the holiday week but continues to run ahead of the last two years.
  • Retail prices declined 0.3% for non-luxury and 0.4% for luxury. Six-week lagged spreads still improving some but starting to plateau.
  • Used retail sales still reported lower after the CDK cyberattack.
  • Similar to used, new car sales dropped, and days’ supply increased as the CDK cyberattack impacted data.

Black Book: Source

June’s depreciation trend continued into July, with the overall market declining by -0.47%, consistent with the previous week’s decline of – 0.51%. Last week, the auctions at the end of the week were slower than normal due to the July 4th holiday, but the overall average conversion rate continues to be in the high 50-percent range.

  • The 0-to-2-year-old Car segments were down -0.39% and 8-to-16-year-old Cars decreased -0.25%.
  • All nine car segments reported a decline last.
  • Compact Car had the largest decline last week, dropping -1.09%, the largest single week decline for the segment since mid-December of last.
  • Truck segment decreased -0.42% compared to the decline seen the prior week of -0.50%.
  • The 0-to-2-year-old models declined -0.33% on average and the 8-to-16-year-olds decreased by -0.26% on average.
  • All thirteen of the Truck segments reported a decline last

Summary: Source

Over the last few years, inflated vehicle trade-in values kept consumers somewhat shielded from falling underwater on their car loans. As the market continues to correct and trade-in values normalize, this protection is falling away, with some vehicle types more affected than others,” said Jessica Caldwell, Edmunds’ head of insights. “It’s not surprising that EV owners are feeling the brunt of accelerated levels of depreciation — this is a fairly standard occurrence for vehicles laden with emerging technology, and incentives on new EVs are only adding to the problem by further depressing used EV values. And this is certainly not making a good case for the fledgling EV market, which is already struggling to gain consumer buy-in.

  • Nearly 1 in 4 consumers who financed a new vehicle purchase with a trade-in were underwater on their prior car loan.9% of new vehicle sales with a trade-in had negative equity, marking the highest level Edmunds has recorded since Q1 2021 at 31.9%.
  • Vehicle owners who are upside down on their auto loans owe more than ever before.The average amount owed on upside-down loans climbed to a record high of $6,255 in Q2 2024, compared to $4,487 in Q2 2022.
  • The average age for vehicle trade-ins with negative equity is on the climb.The average age for trade-ins with negative equity was 3.7 years old compared to 3.4 years in Q2 2023 and 3.2 years in Q2 2022.

A drop in rates may help mop up some of this water but dealers will still have a challenging job on their hands getting car buyers finance for some time.