Smoke on Cars
Auto Market Weekly Summary
Tuesday January 21, 2025
Key Highlights
- Headline inflation accelerated in December as gas prices increased and drove year-over-year inflation higher to 2.9%, but core inflation decelerated and brought core down to 3.2% year over year.
- Retail sales growth slowed modestly in December from November, but the two months were the two best for year-over-year performance. Vehicle sales outperformed the overall market.
- Declines in revolving credit, excluding mortgages, drove consumer credit down in November.
Inflation Trends
Headline inflation, according to the CPI, accelerated to an increase of 0.4% in December, driven by rising gas prices. However, core CPI, which excludes food and energy, saw a decelerating increase of 0.2%, which was weaker than expected. Shelter costs remained high, with a steady increase of 0.3%.
- Transportation commodities less motor fuels decelerated to a gain of 0.7%.
- Used vehicle prices increased by 1.2% following a 2.0% gain in November.
- New vehicle prices increased by 0.5% following a 0.6% increase in the previous month.
- Motor vehicle maintenance saw a steady increase of 0.2%, while motor vehicle insurance accelerated to a 0.4% increase from a previous 0.1% increase.
- On a year-over-year basis, core CPI declined to 3.2% from 3.3%, while overall CPI increased to 2.9% from 2.7% in November.
Retail Sales Performance
Retail sales growth slowed modestly in December, with a weaker-than-expected 0.4% monthly gain. However, November’s stronger gain was revised upward. The auto sector outperformed the rest of the retail market in December.
- Sales excluding motor vehicles and parts increased by 0.4%, while sales of motor vehicles and parts increased by 0.7%.
- Nine of the 12 major retail categories saw sales increases for the month.
- Miscellaneous store retailers and sporting goods, hobby, book, and music stores had the largest gains.
- Building material and garden equipment and supplies dealers, and food services and drinking places experienced the largest monthly declines.
- Retail sales were up 3.9% year over year on a nominal basis, down from an upwardly revised 4.1% year-over-year increase in November.
Consumer Credit Trends
Consumer credit excluding mortgages saw a significant decline in November, driven by a large drop in revolving credit.
- Consumer credit fell by $7.49 billion following an increase of $17.32 billion in October.
- Revolving credit fell by $13.73 billion, while nonrevolving credit increased by $6.24 billion.
Auto Credit Accessibility
Access to auto credit improved slightly in December, according to the Dealertrack Credit Availability Index, but trends were mixed by channel and lender type. Credit remains more accessible compared to a year ago in all channels and by all lender types.
- The approval rate improved, yield spreads narrowed, and down payments declined slightly.
- Credit access was looser across all channels, with the most significant loosening for new vehicle sales.
- Credit unions loosened credit access the most over the past year, while banks loosened the least.
Auto Loan Performance
Auto credit is loosening as the economic outlook stabilizes and used vehicle values firm. We also see stable to improving auto loan performance, which is atypical for the end of the year.
- 60-day+ delinquencies increased in December after declining in November but were down 3.9% year over year.
- In December, 2.02% of auto loans were severely delinquent, up from 1.98% in November and 1.97% a year ago.
- Defaults declined by 2.0% in December but were up 2.4% year over year.
- The annualized default rate for December was 3.17%, higher than the 2.98% rate in December 2019.
- The default rate for the full year of 2024 was 3.13%, which was up from 2.74% in 2023.
Jonathan Smoke
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.