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Smoke on Cars

Auto Market Weekly Summary


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Used-vehicle prices declined again in December while used-vehicle retail sales improved. Lower prices create demand for affordability-challenged consumers.

Inflation, according to the Consumer Price Index, reaccelerated modestly in December. Headline inflation increased to 3.4% from 3.1% in November. 

Consumer credit expanded substantially in November as credit card usage jumped. However, Access to auto credit declined in December as credit tightened across most channels and all lender types. Auto loan performance deteriorated in December as delinquencies and defaults increased.

Used-Vehicle Retail Sales Improved on Lower Prices

Our used retail sales estimates based on vAuto data indicate that sales volumes were up 3% in December compared to November, with volumes up 1% year over year. Certified pre-owned (CPO) sales ended the year with positive momentum, up 11% from November to December and up 1% from a year ago.

According to the Manheim Used Vehicle Value Index, wholesale vehicle values declined 0.5% in December on a seasonally adjusted basis. The decline led the index down to 204.0, which was down 7.0% from a year ago. The unadjusted price change in December was a larger decline of 2.0%, leaving the unadjusted average price down 7.7% year over year.

Headline Inflation Reaccelerated in December

Headline inflation reaccelerated in December, according to the CPI. The headline aggregate measure increased 0.3% in December on a seasonally adjusted basis, up from a 0.1% increase in November.

The core CPI, which excludes Food and Energy, increased 0.3%, which was unchanged from November. Housing saw an accelerating increase to 0.5% from 0.4%.

Transportation saw a 0.2% increase, driven by increases in prices of new and used cars and insurance but declines in fuel and maintenance.

In actual transaction data, we observed used car prices declining and new car prices increasing in December. On a year-over-year basis, core CPI declined to 3.9% from 4.0%, reaching the lowest since Mary 2021. The overall CPI increased to 3.4% from 3.1% in November.

Consumer Borrowing Ramped Up

Consumer credit excluding mortgages saw reaccelerating growth in November, according to the last report by the Federal Reserve. Consumer credit grew by $23.75 billion, up substantially from October’s $5.78 billion increase.

The November acceleration in growth was in both types of credit, but the growth in revolving debt was the most substantial. Non-revolving debt, made of auto and student loans, accelerated to an increase of $4.62 billion. Credit card debt accelerated to growth of $19.13 billion, which was its largest monthly expansion since March 2022.

Access to Auto Credit Declined in December

Access to auto credit declined in December as credit tightened across most channels and across all lender types, according to the Dealertrack Credit Availability Index. Improvements in the Dealertrack Auto Credit Total Loan Index that had occurred in the summer and fall were erased at the end of the year as the index declined in November and another 0.9% in December to the lowest level since May.

Credit access in all channels and lender types ended 2023 tighter than a year ago. Compared to February 2020, credit access was tighter in all channels except for used sales through independent dealers and for loans from auto finance companies.

Movement in credit availability factors mostly moved against consumers in December. Yield spreads widened, term length declined, and the negative equity share declined, and those moves reduced credit access for consumers.

Increases in the approval rate and the subprime share represented the only improvements for consumers. The down payment share was unchanged but at the highest level in the history of the data series.

By channel, new loans for CPOs saw the most tightening, while new loans in total through independent used dealers saw the only loosening. On a year-over-year basis, all channels were tighter, with used loans through franchise dealers having seen the most tightening. Among lenders, credit unions tightened the most and were the tightest year over year.

Auto Loan Performance Deteriorated in December

Auto loan performance deteriorated in December as delinquencies and defaults increased. Delinquencies of 60 days or more increased for the eighth month in a row and were up 8.5% from a year ago.

In December, 1.97% of auto loans were severely delinquent. That was up from 1.92% in November, the highest rate dating back to at least 2006. 7.70% of subprime loans were severely delinquent. That was up from 7.53% in November and was also the highest rate for any month dating back to at least 2006. The subprime severe delinquency rate was 59 basis points higher than a year ago, while the aggregate was 14 BPs higher.

The delinquency rate was high all year but did not lead to a similarly elevated level of defaults. Still, defaults increased in December. Defaults of auto loans increased by 10.3% in total in December from November and were up 22% from a year ago. Defaults of subprime auto loans increased by 11.6% in December and were up 11.6% from a year ago. The default rate in 2019 was 2.90%. The default rate in 2023 was 2.74%.

Jonathan Smoke
Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.

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