US Auto Industry Reaches A Milestore
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In October, new-vehicle incentives hit 7.7% of ATP – the highest level since the spring of 2021 – as automakers and dealers alike opened their wallets to move the metal. Let’s just say it: The sellers’ market is dead and gone. Our new-vehicle sales forecast for November will be out next Tuesday, before we escape for the Thanksgiving holiday, and all indications are higher inventory and higher incentives will spur further market momentum.
Yesterday, we released our mid-month Manheim Used Vehicle Value Index, which showed prices reversing direction and moving higher again, climbing 1.6% in the first 15 days of November on a seasonally adjusted basis. As Senior Director of Economic and Industry Insights Jeremy Robb noted, “Retail used-vehicle sales have increased for five consecutive weeks as well, and that should keep dealer demand for wholesale units elevated.”
And what do we know about elevated demand? Prices go up. Year over year, wholesale prices in mid-November were higher, as inventory remains relatively tight and demand healthy. The good news for consumers is that retail prices on used-vehicle lots continue to trend lower year over year, although our team observed a slight uptick through October.
With the finish line for 2024 coming into view, our dashboards look pretty good. As is often the case, the story is rooted in affordability. Our latest report on new-vehicle affordability shows more positive signs as household incomes climb, discounts improve, and loan rates trend lower.
Auto loan delinquencies and defaults remain high as the long-term impact of inflation weighs heavily on some households. Still, our team is observing lenders growing more aggressive, and that is helping maintain a healthy sales pace. Cox Automotive Chief Economist Jonathan Smoke noted: “Auto loan rates are beginning to decline, offering some relief to consumers. In October, we also observed an improvement in auto credit availability. Although new-vehicle prices remain stubbornly high, these improvements in auto credit, along with increased incentives from automakers, are driving new-vehicle sales as we approach the end of the year.”
Good news, indeed. And yes, we know. Good news can be fleeting. But I’m from Detroit, and we celebrate when it’s good. Our Lions are sitting 9-1 and atop the NFL. Sure, the coin has another side and things can flip fast. For now, though, we’re enjoying the positive momentum, in the auto market and at Ford Field.
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