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Smoke on Cars

Auto Market Weekly Summary


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Article Highlights

  1. Both the average new-vehicle transaction price and discounting rose in January.
  2. Used-vehicle retail sales rose as prices held steady.
  3. Auto loan delinquencies and defaults increased in January.

New-vehicle prices fell in January with weaker retail demand. Incentives relative to price reached the highest level since July 2021. Discounting relative to the manufacturer’s suggested retail price (MSRP) has decreased slightly to nearly half of what it was in 2019 after being nonexistent a year ago.

Used-vehicle prices were flat again in January, as used retail sales in January improved over December but were down slightly year over year with harsher winter weather this year.

Consumer credit growth slowed significantly in December as consumers pulled back on all types of credit. Access to auto credit declined in January as credit tightened across all channels and across most lender types, according to the Dealertrack Credit Availability Index published this morning.

Auto loan performance deteriorated in January as delinquencies and defaults increased.

Average New-Vehicle Transaction Price and Discounting Increased in January

The average transaction price of a new vehicle in January declined 2.6% from December to an initial estimate of $47,401, according to Kelley Blue Book data. This was the lowest average price since May 2022. [Check back in the Newsroom this afternoon for more details.]

The average price relative to the average MSRP moved up slightly to 97.1%, from what had been the lowest level since March 2021. The average price was down 3.5% from a year ago. The average MSRP declined 2.6% in January from December and was down 1.6% from last year.

The average incentive spend from manufacturers increased 0.7% to $2,703, which was up 93% year over year. Meanwhile, incentives as a percentage of the average transaction price increased to 5.7%, the highest level since July 2021.

Used Retail Sales Rose as Prices Held

Our used retail sales estimates based on vAuto data indicate that sales volumes were up 5% in January compared to December, with volumes down 3% from last year. Certified pre-owned (CPO) sales declined 12% from December to January but were flat year over year.

According to the Manheim Used Vehicle Value Index, wholesale vehicle values were unchanged in January on a seasonally adjusted basis, as the Index remained at 204.0, down 9.2% from a year ago. The unadjusted price change in January was a decline of 0.2%, leaving the unadjusted average price down 9.3% year over year.

Consumer Credit Declined as All Borrowing Decelerated

Consumer credit excluding mortgages saw a substantial deceleration in growth in December, according to the latest report by the Federal Reserve. Consumer credit grew by $1.56 billion, down substantially from November’s $23.38 billion increase.

The December deceleration in growth was in both revolving and nonrevolving debt, but the decline in growth of revolving debt was the most substantial. Nonrevolving debt, which is made of auto loans and student loans, decelerated to an increase of $0.52 billion. Credit card debt decelerated to growth of $1.04 billion from $17.93 billion in November.

Auto Credit Index Declined to Lowest Level Since August 2020

Access to auto credit declined in January as credit tightened across all channels and across most lender types, according to the Dealertrack Credit Availability Index published this morning.

The Dealertrack Auto Credit Total Loan Index had shown some improvements during the summer and fall of last year, but those gains have been wiped out by the declines seen over the past three months. In fact, the index dropped by 1% in January, marking the lowest level since August 2020.

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

Movement in credit availability factors mostly moved against consumers in January. Yield spreads widened. Term length, approval rate, and subprime share all declined, and those moves reduced credit access for consumers. An increase in the negative equity share represented the only improvement for consumers. The down payment share was unchanged but at the highest level in the history of the data series.

By channel, new-vehicle loans saw the most tightening, while used loans through independent used-vehicle dealers saw the least amount of tightening. On a year-over-year basis, all channels were tighter, with used loans through franchised dealers having seen the most tightening. Among lenders, banks tightened the most in January, but credit unions were the tightest year over year.

Auto Loan Delinquencies and Defaults Increased in January

Auto loan performance deteriorated in January as delinquencies and defaults increased.

Loans that were delinquent by 60 days or more increased for the ninth month in a row and were up 7.9% from a year ago. In January, 2.03% of auto loans were severely delinquent. That was up from 1.97% in December and was the highest rate dating back to at least 2006.

Of subprime loans, 7.91% were severely delinquent. That was up from 7.70% in December and was also the highest rate for any month dating back to at least 2006. The subprime severe delinquency rate was 61 basis points higher than a year ago, while the aggregate was 14 BPs higher.

The delinquency rate was high throughout 2023 but did not lead to a similarly high level of defaults, but defaults increased in January. Defaults increased by 2% in total in January from December and were up 17% year over year. Defaults of subprime auto loans declined by 0.5% but were up 7.2% from a year ago. The annualized default rate in January was 3.15%, the highest since February 2020.

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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