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Cox Automotive Industry Update


The fact that October new-vehicle sales were notably higher than they were one year ago is hardly a surprise, as the market in October 2021 was historically bad, thanks to historically low inventory. One year on, inventory levels are improving and, so too, are vehicle sales. Our team had forecast an improved year-over-year and month-over-month sales pace for October, and early indications are sales came in above our  expectations.

In an update to our forecast, the team notes, "
Overall, it now appears the new-vehicle sales pace in October was the strongest since January. That’s good news for the auto industry. We’ve been expecting some softening in overall demand, but not a full collapse. Looking at the initial October results, that’s exactly what we see."

Are Prices About To Fall?
With new-vehicle inventory improving in some corners of the auto market, the question on everyone's mind is: When will we see price relief?

It's a fair question, one we put to our senior director of new-vehicle solutions, Brian Finkelmeyer. He shared his thoughts on Monday: "
The answer: It depends. If a shopper is holding out for a smoking hot deal on a new Kia Telluride, they are likely to find only disappointment. However, if the same shopper is interested in a $65,000 Ram 1500 pickup, the answer is a definite YES. There are good deals to be had." Read Brian's take on the situation, and why, when it comes to a good deal, what you're trading in is likely as important as what you want to buy. 

So What Happened to Leasing? 
The other question on our mind: What happened to the leasing business, and how will a decline in leasing impact the market for years to come? Senior Economist Charlie Chesbrough weighed in on that topic last Friday: Leasing Decline Has Short-Term and Long-Term Implications. Off-lease vehicles are an important part of the used-vehicle market and core to the certified pre-owned (CPO) business. According to our estimation, "Starting in 2023, the effects of the pandemic-driven slowdown and the changes in leasing will significantly impact used-vehicle supply. The number of lease maturities from 2023-2025 is expected to be 2.5 million fewer than the total maturities between 2020-2022." This is a trend we will be watching in the years ahead. 

And before I go: Chief Economist Jonathan Smoke is in full Fed-Watch mode today and will post his take this afternoon, after the Powell presser. The Fed's rapid-fire rate increases are already challenging the market and knocking a lot of would-be buyers to the sidelines. Further moves will likely only cool demand further and make our market more dependent on a smaller group of high-net-worth, high-credit-score buyers flush with cash. Hope your Powerball ticket hits tonight!  

Mark Schirmer
Director | Corporate Communications
Mobile: 734-883-6346
Twitter: @MarkSchirmer1