Auto Market Weekly Summary

Highlights

• Used retail vehicle sales volumes, according to vAuto data, and the Manheim Used Vehicle Value Index declined in April compared to March.
• According to the latest Federal Reserve report, consumer credit, excluding mortgages, experienced a significant deceleration in growth in March.
• The decline in consumer sentiment and the expectation of rising inflation could further influence purchasing decisions, especially for significant investments like vehicles.

Used Vehicle Sales and Values

In April, used retail vehicle sales volumes decreased compared to March, while certified pre-owned (CPO) sales declined month over month. Additionally, the Manheim Used Vehicle Value Index declined on a seasonally adjusted basis.

• Used retail sales estimates based on vAuto data indicate that sales volumes were down 4% in April compared to March, with volumes up 9% year over year.
• CPO sales declined 10% month over month and were down 3% year over year.
• Wholesale vehicle values, according to the Manheim Used Vehicle Value Index, declined 2.3% in April on a seasonally adjusted basis, as the Index declined to 198.4, which was down 14.0% from a year ago.
• The unadjusted price change in April was a decline of 0.6%, leaving the unadjusted average price down 11.9% year over year. April saw weaker conditions than the month typically sees.

Consumer Credit

According to the latest Federal Reserve report, consumer credit, excluding mortgages, experienced a significant deceleration in growth in March.

• Consumer credit grew by $6.27 billion, down substantially from February’s $15.02 billion increase.
• The March deceleration in growth was in revolving debt, which slowed to a minuscule increase of just $0.15 billion.
• Non-revolving debt, which includes auto loans, student loans and mortgages, accelerated to an increase of $6.12 billion.

Auto Credit Access

The tightening of auto credit in April, particularly for CPO vehicles and across various lender types, suggests a cautious approach from financial institutions.

• Access to auto credit declined slightly in April as credit tightened across new and CPO channels and at banks and captives.
• The approval rate and the subprime share both declined, making credit access more challenging for consumers. However, yield spreads narrowed, negative equity increased, term length increased, and down payments increased, and the changes in those factors were beneficial for consumers.
• Credit access in April was tighter than a year ago in all channels except used sales through independent dealers.
• Credit access was more varied by lender type year over year, as credit unions and auto-focused finance companies were looser while banks were tighter, and captives remained unchanged.
• By channel, CPO loans saw standards tighten the most, while used loans through independent dealers saw the most loosening.

Auto Loan Performance

Auto loan performance improved in April as delinquencies and defaults both declined. However, the level of distress remains elevated.

• Assisted by tax refunds, 60-day+ delinquencies declined for the second month in a row but were up 11.8% year over year.
• In April, 1.77% of auto loans were severely delinquent, down from 1.88% in March but the highest rate for the month of April dating back to at least 2006. 6.79% of subprime loans were severely delinquent, down from 7.25% in March but the highest rate for the month of April dating back to at least 2006.
• The subprime severe delinquency rate was 61 basis points (BPs) higher year over year, while the aggregate was 17 BPs higher. The delinquency rate was high throughout 2023 but did not lead to a similar record level of defaults. Like delinquencies, defaults declined in April by 11.2% from March but were up 27.3% year over year.
• Subprime auto loan defaults declined by 17% in April but were up 15.9% year over year. The annualized default rate for the month of April was 3.00%, 40 BPs lower than March but higher than the 2.74% annualized default rate in April 2019. The year-to-date default rate is 3.17%, which is equivalent to the default rate in 2010.

Consumer Sentiment and Economic Outlook

The decline in consumer sentiment and the expectation of rising inflation could further influence purchasing decisions, especially for significant investments like vehicles.

• The initial May reading on Consumer Sentiment from the University of Michigan fell 12.7% to 67.4, which was the lowest level since November.
• Future expectations and views of current conditions both declined similarly. Expectations for inflation in one year and in five years both increased.
• Consumers’ views of buying conditions for vehicles fell to the lowest level yet this year but remained better than a year ago. Consumers’ view of vehicle prices improved slightly, but their view of interest rates deteriorated.
• The daily index of consumer sentiment from Morning Consult points to another small decline in the first half of the month. As of May 10, that index has declined 0.5% for the month.
• The average price for unleaded gas has declined 0.7% so far in May, according to AAA. At $3.64 per gallon for unleaded as of May 9, gas prices are up 16.9% year to and up 3% year over year.

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.