Auto Market Weekly Summary

As the fall progresses, the trends for COVID-19 are worrisome. Daily new COVID-19 cases continue an upward trend. The case growth is accelerating and causing higher hospitalizations as well. The impact on the economy continues.

Consumer sentiment has been bumpy, the jobs recovery has lost momentum, and the retail vehicle market has softened. The retail vehicle market has softened this fall. Used-vehicle prices are coming down. High unemployment and the lack of more stimulus will likely lead to less spending and more credit issues in the weeks ahead.

Consumer credit falls: Consumer credit declined in August. Severe delinquencies started picking up in September even though loan accommodations remain elevated.

The Federal Reserve reported that consumer credit excluding housing-related debt declined in August. Revolving credit (credit card balances) fell while non-revolving debt (auto loans and student loans) increased somewhat, and the smallest monthly increase this year except for April.

Declines in student loan originations were likely larger than auto loan declines, but we know that retail sales of new and used vehicles softened in August just as the expanded unemployment benefits expired at the end of July.

Weekly reports from Equifax show rising delinquencies in each week through Sept. 22. However, the severe delinquency rate is still lower than it was pre-pandemic or last year because loan accommodations remain elevated. Credit conditions are likely to deteriorate rapidly as fiscal support fades.

Jobs recovery stalled: The jobs recovery has lost momentum. The latest data show 11 million on traditional unemployment benefits, which are limited to six months of coverage, but 25.5 million remain on some form of unemployment benefits, including pandemic unemployment assistance, which provides coverage beyond six months.

By this point six months ago, more than 11 million people had filed for unemployment assistance, and those initial 11 million would no longer qualify for continued traditional assistance. Initial claims were down modestly to 840,000 but remain very high by historical standards.

Consumer sentiment volatile: Consumer sentiment has been bumpy so far in October, but it is not declining yet. Sentiment is now down by 18.8% compared to the end of February. It was slightly better at the end of September.

Retail vehicle market softens: Our initial estimates show that used vehicle sales were down 5% from a year ago in September. The September used SAAR was 38.0 million, down from 39.8 last September but unchanged from August. The September used retail SAAR estimate was 20.2 million, down from 20.7 million last year and down from August’s 20.3 million. CPO sales in September increased by 9.8% from a year ago but were down 6% from August. CPO sales are down 7% year to date.

The Manheim Used Vehicle Value Index (MUVVI) declined 1.58% from August to September. The decline brought the Index to 161.2, which was a 15.2% increase from a year ago. On a year-over-year basis, all major market segments saw seasonally adjusted increases in September. Luxury cars and pickups again outperformed the overall market. [Listen to the replay of the Q3 MUVVI call.]

Weekly three-year-old Manheim Market Report (MMR) price indices saw accelerating declines each week ending with a 0.9% decline in the last full week of September, which was the biggest weekly decline in 22 weeks. MMR Retention averaged 99.5% for the four full weeks of September. Likewise, the sales conversion rate declined in September to a level that was much more typical for this time of the year.

Check back on Smoke on Cars for a video that will include updated data.