Auto Market Weekly Summary

This edition of the Auto Market Weekly Summary includes updates on new-vehicle affordability, retail sales, and consumer sentiment. Recent data tells a story of continued resilience in the face of mounting economic pressure: improving new-vehicle affordability and strong monthly retail sales gains colliding with surging gas prices and deteriorating consumer sentiment.

Bottom Line Up Front

Last week brought a significant moment for monetary policy: Fed Chair nominee Kevin Warsh appeared before the Senate Banking Committee Tuesday, where he pledged that central bank independence “is essential” and vowed he would not be politically directed on rate decisions, while signaling plans for what he calls “regime change” — including a new inflation framework and a reduced reliance on forward guidance.

His path to confirmation cleared meaningfully on Friday, as the Department of Justice dropped its criminal investigation into current Chair Jerome Powell — the hurdle that had led Senator Thom Tillis to block a confirmation vote.

The Federal Open Market Committee (FOMC) convenes this week, and markets are pricing in near-certainty of no change to the federal funds rate, currently at 3.50–3.75%. Elevated energy prices from the Middle East conflict continue to cloud the inflation outlook and diminish any near-term case for easing.

For consumers and dealers, the macro picture remains a study in competing forces. Tax refunds continue to provide a meaningful stimulus, though for many households, those extra dollars are being absorbed at the pump rather than flowing into discretionary spending. New-vehicle affordability improved in March, and retail sales posted their strongest monthly gain in decades. Consumer sentiment, however, deteriorated sharply. The spring selling season remains intact, but the window for translating refund dollars and credit availability into vehicle sales is closing, as energy prices remain elevated.

New Vehicle Affordability

New-vehicle affordability improved in March, as strong income growth, higher incentives, and lower prices combined with stable interest rates to enhance buying power. Compared to last March, the estimated number of weeks of income required to buy a new vehicle fell by 0.9%, indicating a meaningful easing in affordability pressures for consumers.

• In March, the average auto loan rate was 16 basis points lower year over year, reflecting a small but notable improvement in financing costs.
• The average transaction price (ATP) fell 0.1% month over month, while household income rose 0.3%.
• ATP was higher by 3.5% year over year while income increased 3.9% over the same period—suggesting income growth is outpacing vehicle price gains.
• The typical monthly payment in March was $752, a 2.9% increase year over year and a decline of 0.5% from February.
• The median number of income weeks required to purchase a new vehicle in March fell to 35.1 weeks from 35.4 weeks in February and 35.4 weeks last year, highlighting continued improvement in affordability.

Retail Sales

Retail sales accelerated in March, driven in part by surging gasoline station receipts. As energy prices climbed sharply amid the Middle East conflict, retail sales showed the largest month-over-month gain in decades. The underlying picture for vehicle remained soft on a year-over-year basis.

• Total retail and food services sales rose 1.7% month over month on a seasonally adjusted basis in March and are up 4.0% year over year. Excluding motor vehicles and parts, sales rose 1.9% in the month, and core sales (excluding autos and gasoline) increased 0.6%.
• The monthly increase for retail sales was the largest on record for the data series, which goes back to early 1992. Much of the increase, however, was driven by gasoline station receipts, which surged 15.5% month over month. The sharp rise in energy prices inflated the headline figure and soaked up consumers’ purchasing power.
• Motor vehicle and parts dealers posted a modest 0.5% month-over-month gain on a seasonally adjusted basis but showed a decline of 2.1% against levels from last year — with auto and other motor vehicle dealers down 2.4% year over year.
• Year-over-year comparisons for motor vehicle dealers will remain a headwind in the coming months, as tariff-driven pull-ahead spending in 2025 set a high baseline.

Consumer Sentiment

Readings on consumer sentiment were mixed throughout April and remain lower against year-ago levels on both surveys tracked. While the headlines have eased somewhat surrounding the Middle East conflict, gas prices remain above $4 per gallon and uncertainty about the future impact of inflation remains top of mind for consumers.

• The University of Michigan reported that consumer sentiment fell to 49.8 in April, a decline of almost 5% against last year and lower by 7% versus last month.
• The reading of the index was a new low, moving below the 50.0 reading last breached in June 2022, when inflation was running at its highest levels in decades.
• Consumers’ expectations of prices over the next year increased to 4.7%, with the five-year inflation expectation rising to 3.5%.
• Morning Consult’s index of consumer sentiment shows slightly higher readings against last month, up by less than 1% since the end of March, yet still roughly 5% below the same time last year.
• Gas prices have remained above $4 per gallon the entire month of April and are up 36% since the conflict began this year.