Cox Automotive Update: Values, Affordability and Inventory

In Southeast Michigan, where this note was drafted this morning, the signs of summer have returned: Trees are all but fully bloomed and the gardens are tall and green again. The annual cycle continues, so much looks the same.

Not so in our auto industry. A year ago, the market was roaring, with strong new- and used-vehicle sales and optimism in the air. But then came evidence of a hobbled global supply chain, and everything changed. This week, the Cox Automotive Industry Insights team has shared three Data Points to illustrate today's market. One, two, three...

1) Cox Automotive / Moody's Analytics Vehicle Affordability Index: The April numbers were shared on Monday, and even with data revisions, the song remains the same. Household incomes have improved, but are not keeping pace with increasing new-vehicle prices. The Index hit 40.6 in April, up from a revised 40.2 in March. For the average American household, the dream of purchasing a new vehicle continues to fade. 

2) Manheim Used Vehicle Value Index: Our popular mid-month MUVVI was shared on Tuesday, and while wholesales values of used vehicles increased slightly during the first two weeks of May, the wholesale market is anything but routine right now. After a historic run-up at the end of 2021, the typical spring bump in wholesale values has been hard to track, with a bounce that started later than normal and has been more spread out than normal due to late tax refunds. The average daily sales conversion rate in the first half of May was flat relative to April and has been slightly lower than the typical conversion rate this time of year.

Chief Economist Jonathan Smoke recently noted, "While there is little risk in the new market in terms of demand, the used-vehicle market is a different story. We're seeing evidence of slowing demand, even with supply fairly normal (by days’ supply measure). Higher loan rates and worsening financial conditions for lower income households paint a different picture in used than in new. We think used demand is softening."

3) vAuto Available Inventory data: Our numbers on new-vehicle inventory were released this morning, showing available inventory at the end of April down 40% from the same period in 2021. In raw volume, the supply of 1.13 million unsold new vehicles as May opened was about 800,000 vehicles less than the supply a year ago, when the global chip shortage became evident. More notable: The market has 2.2 million fewer new-vehicle available today than it did in 2020. 

Yes, it's spring again in Michigan, and familiar. But the world feels very different.

As always, we appreciate your interest in Cox Automotive. Be sure to check out the Auto Market Snapshot for a quick look at all the data we are tracking, powered by DRiVEQ, of course. And if you have any questions or want to connect with any of the analysts or experts at Cox Automotive, feel free to reach out. We'd be happy to help!

Cheers,