Auto Market Weekly Summary

Key Highlights:

• Inflation data has yet to show much of an impact from tariffs, as the consumer price index (CPI) was softer than expected again in May.
• Auto loan credit availability improved in May as all channels and all lender types loosened credit access.
• Auto loan performance was mixed, with 60-day+ delinquencies rising and defaults falling in May.

Inflation

Inflation data has yet to show much of an impact from tariffs, as the consumer price index (CPI) was softer than expected again in May. On a year-over-year basis, core CPI was steady at 2.8% while the overall CPI increased to 2.4% from 2.3% in April, which had been the lowest year-over-year reading since February 2021.

• Headline CPI rose just 0.1% month over month, down from 0.2% in April, and below the expected 0.2%.
• Core CPI, which excludes food and energy, also increased 0.1%, falling short of the 0.3% forecast.
• Price declines were observed in energy, apparel, transportation, and recreation services.
• Shelter costs continued to rise, increasing 0.3% month over month.
• Private transportation costs fell 0.5%, with new vehicle prices down 0.3% and used vehicle prices down 0.5%.
• Motor vehicle parts prices rose 0.9%, and motor vehicle insurance increased 0.7%.
• Wholesale used vehicle prices declined in May, according to the Manheim Used Vehicle Value Index, while used retail prices were mostly higher and new retail prices remained flat.

Consumer Credit

Consumer credit expanded in April, consistent with accelerating spending on goods.

• Total consumer credit excluding mortgages rose by $17.87 billion, the largest monthly increase since December.
• This followed a downwardly revised $8.60 billion increase in March.
• Revolving credit (e.g., credit cards) increased by $7.63 billion, up from $1.79 billion in March.
• Nonrevolving credit (e.g., auto and student loans) rose by $10.25 billion, up from $6.81 billion in March.

Auto Credit Access

Auto loan credit availability improved in May as auto loan performance was mixed.

• Access to auto credit improved in May, as all channels and all lender types loosened according to our Dealertrack Credit Availability Indices.
• Approval rates increased, subprime share rose, loan terms lengthened, and down payments declined.
• Negative equity increased, but the yield spread widened slightly, though not enough to offset the overall improvement in credit access.
• Credit access loosened the most for new loans, especially from non-captive lenders.
• Captives loosened standards the most among lender types in May.
• Compared to a year ago, credit access was looser across most channels, with banks showing the most improvement and captives slightly tighter.

Auto Loan Performance

Auto loan performance was mixed in May.

• 60-day+ delinquencies increased, ending a three-month streak of declines as the impact of tax refund season faded.
• The share of severely delinquent auto loans rose to 1.84%, up from 1.77% in April and 1.80% a year ago.
• Subprime severe delinquencies increased to 6.81%, up from 6.52% in April but down from 6.90% a year ago.
• The subprime severe delinquency rate was 8 basis points lower year over year, while the aggregate rate was 4 basis points higher.
• Total defaults dropped 25.5% month over month and were down 8.3% year over year.
• Subprime defaults fell 25.9% month over month and 12.4% year over year.
• The annualized default rate for May was 2.62%, down 88 basis points from April, 20 basis points from last year, and 1 basis point from May 2019.
• The year-to-date default rate stands at 3.14%, nearly identical to the full-year 2024 rate of 3.13%, and closest to the 3.18% rate seen in 2007.

Consumer Sentiment

Consumer sentiment measures show positive trends in the first half of June.

• The University of Michigan’s sentiment index’s preliminary June reading jumped 15.9%, significantly exceeding expectations.
• The index recovered some of its decline since February, though it remains down 11.3% year over year.
• Both current conditions and expectations improved, with expectations seeing the largest gain.
• One-year inflation expectations dropped to 5.1% from 6.6%, and five-year expectations declined to 4.1% from 4.2%.
• Consumers’ views on vehicle buying conditions improved to their most favorable level since February.
• The daily index of consumer sentiment from Morning Consult also showed a modest upward trend.
• After a 7.1% increase in May, the index rose another 0.7% through mid-June.
• Both current conditions and future expectations improved, with current conditions showing the strongest gains.

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.