The Automotive Advisor Team

 

Recapping all of the used car trends below, our guidance at the automotive advisor team to our dealer clients is to prepare now for a steady and slightly greater tax season than expected. No indications yet that we’ll have a tax season better than we’ve seen in the past but during this recessionary period with some of the IRS changes it could be better than we expect. Having said that understanding your acquisition to retail to disposal strategy to grow market share and sales volume while also growing departmental profit will require calculated courage through surgical execution of the operational guidance these trends provide. If you need a partner to help you with that, please reach out HERE.

Automotive Market Economic Outlook: Source

  • Income withholding threshold increases for consumers starting in January 2024:
    • Higher federal income tax brackets and standard deductions will take effect at the beginning of January, potentially giving Americans a chance to increase their take-home pay in 2024 and shield more of their income from the IRS.
    • This year, the tax brackets are shifting higher by about 5.4%. The higher thresholds where tax rates take effect could mean savings for millions of Americans across all income brackets.
    • Potential Fed Rate Reduction in Q2 and Q4 to stimulate the economy and pull us out of this mild recession expected in the 1st
  • 2025 Tax Season Returns will increase buying power for consumers:
    • The IRS announced last month an increase in standard deductions for this upcoming filing year to combat the mild recession ahead.
    • The changes were put into place to stimulate the economy in 2024 and 2025.

Inventory Supply vs Price: Source

December used car inventories available supply has reached 2022 levels your year but is still significantly behind 2019 and 2020 levels. The average listing price for used vehicles in the market has stayed between 26 and 28,000 all year with the highest retail prices happening in the middle of the year. Currently, we’re sitting at March’s retail price of $26,000.

 

The new car average vehicle transaction price has stayed soft most of the year with a slight increase in the last couple of months. With available supply shown in the below right craft, coupled with OEM incentives buying down interest rates, new cars are expected to stay steady even with the affordability issue in to 2024. Cox automotive is forecasting very little change in new car sales next year.

 

Wholesales to Retail Trending:

  • Manheim

    • Wholesale used-vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 0.3% from November in the first 15 days of December.
    • The midmonth Manheim Used Vehicle Value Index rose to 205.5, which was down 6.3% from the full month of December 2022.
    • The seasonal adjustment largely drove the increase. The non-adjusted price change in the first half of December dropped 1.1% compared to November, while the unadjusted price was down 6.8% year over year.

  • Black Book:

    • The volume-weighted, overall Truck segment decreased -0.78% compared to the depreciation seen the prior week of -1.06%.
    • The 0-to-2-year-old models declined -0.73% on average and the 8-to-16-year-olds decreased by -0.85% on average.
    • All thirteen Truck segments declined last week, with only four of the thirteen reporting declines exceeding 1%.
    • The Compact Crossover/SUV segment had the smallest depreciation last week, declining -0.48%, compared with -0.96% the previous week.
    • The Sub-Compact Luxury Crossover/SUV segment had the largest decline last week, dropping -1.28%. The segment has averaged a decline of -1.33% per week over the most recent eight weeks.

MMR / Black Book Comparison with our Team’s Proprietary Macro Acquisition Pivot Strategy Guidance:

Retail Market Outlook:

  • Revisiting last week’s retail outlook, November 2023 (Far Right Bar) finished above November of 2022 (Far Left Bar) and December looks like it’s going to come in equal to or just slightly above December of.
  • Following the same trajectory, the green line should give us some representation on what our sales rate could look like in the first and second quarters of 2023.

 

  • As a reminder the orange trim line below represents the autos retail market index which is the average price of inventory in the model year of 2020 for sale in the market. The blue line is the average MMR price for that same year model of inventory. The space in between is the margin. As you can see it’s starting to shrink a little bit because the wholesale valuation of inventory is showing signs of strength. Moving into the next year this will be a critical trend to watch.

Summary:

  • Recapping all of the trends below, our guidance at the automotive advisor team to our dealer clients is to prepare now for a steady and slightly greater tax season than expected. No indications yet that we’ll have a tax season better than we’ve seen in the past but during this recessionary period with some of the IRS changes it could be better than we expect.
  • Having said that understanding your acquisition to retail to disposal strategy to grow market share and sales volume while also growing departmental profit will require calculated courage through surgical execution of the operational guidance these trends provide. If you need a partner to help you with that, please 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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