The Automotive Advisor Team

Different Outlooks of Dealers and Buyers?

 

Economic Source

  1. Nearly 3 in 4 consumers expect the upcoming U.S. presidential election to impact the economy.
  2. A notable 66% of consumers and 82% of dealers feel the outcome of the election will affect interest rates.
  3. Inflation is the No. 1 concern among shoppers, with 74% of consumers and 81% of dealers believing the next election will influence it.
  4. According to 60% of consumers, the November election will affect their next vehicle purchase.
  5. Most consumers feel the election will not impact their powertrain decisions; the majority are opposed to government mandates on electric vehicles.

Manheim Wholesales Market Source

The three-year-old wholesale values continued the 0.4% weekly depreciation rate. Lane efficiency increased slightly. Used retail sales trended close to 2019 levels and days’ supply is at 42 days. New retail sales still running slightly below 2019 levels. New days’ supply at 75 days.

  • Driven primarily by the luxury segment, the 3-year-old index depreciated 0.4% to 96.6%. Non-luxury depreciated 0.2% and luxury depreciated 0.8%.
  • Wholesale values dropped for all model years.
  • Sale prices still below MMR (-1.32%). Luxury retention continues to move much lower for newer model years.
  • Lane efficiency was flat for 3-year-olds and increased slightly for 6-year-old models and is running ahead of the last two years.

Black Book: Source

  • The market continues to decline at about half a percent per week, which is higher than the pre-pandemic average of nearly a quarter percent for this time of year.
  • Auction activity remains steady with the conversion rate consistently at 56%.
  • On a volume-weighted basis, the overall Car segment decreased -0.62%. For reference, in the previous week, cars decreased -0.58%.
  • Average auction sales rate this week was 56%, no change from the previous week.
  • The estimated Used Retail Days-to-Turn is rising and is now at 44 days.

 

Retail Trending: Source

The used car business is still active, with Carvana and CarMax posting solid results. Carvana reported significantly improved average front-end gross margins in their latest earnings report, from $808 in 2022 to $3,030 in Q1 2024, a key factor behind its stock price increasing more than six-fold compared to last year! CarMax continues to have strong retail margins at $2,347 and set records in both wholesale gross and extended protection plan sales in Q1.

The spring bounce in used-vehicle sales was generally muted but used retail sales are currently running higher year over year by about 9%. Inventory remains relatively tight in used vehicles, but so far, it’s sufficient to keep sales healthy.

  • Retail prices declined 0.1% for non-luxury and 0.4% for luxury. Spreads improving due to steeper declines in wholesale values.
  • The used retail sales rate trended similar to 2019; days’ supply held steady at 42 days with new car sales trending slightly below 2019 levels and days’ supply at 75 days.

Rental risk prices also declined by 5.7% compared to the full month of May. Average mileage for rental risk units in the first half of June (at 49,900 miles) was down 12% compared to a year ago and fell by 11.6% against May 2024.  This activity in the market has many dealers getting CTM drunk but being left with rental rockets that age out and lose money once disposed of.

Looking at the spread between retail implied sold and retail sold gives us a lens into what is leaving the dealership’s inventory that has not sold either through the hostel channel or through internal store transfers. The larger the gap the more inventory is aging and not selling out and being disposed of and alternate channels other than retail. This helps us determine what our day supply should be but also how well our inventory-based strategy is working compared to the demand for that inventory in our market.

Summary: Source

Car shoppers believe that vehicle prices will change due to the election, with 41% expecting prices to rise and only 26% of shoppers expecting prices to fall after the November election.

  • Thirty-three percent believe the election will have no impact on vehicle prices.
  • A majority of shoppers (52%) expect the election outcome not to affect their decisions to buy luxury or non-luxury a majority of dealers do believe that the political climate ahead of the November election is increasingly becoming a factor holding back business.
  • Moreover, shoppers are also in general agreement (61%) that the November election will NOT impact what powertrains they will consider, and a majority of shoppers (54%) disagree with the statement. Who is right??? Are we listening to our consumers or our people??