- Rising COVID-19 cases and deaths threatens the economic rebound.
- Used vehicle sales and prices are recovering.
- Credit tightens, especially for subprime borrowers.
We continue to see new peaks in daily COVID-19 cases reported in the U.S. The pace of growth is now slowing, but, unfortunately, daily deaths are now rising.
The growing cases of COVID-19 threatens the economic recovery. June saw a recovery in vehicle sales and values, but a slowdown in activity from the coronavirus outbreaks could threaten job recovery and weigh on consumer sentiment.
Used vehicle recovery: Our initial estimates show that used vehicle sales are improving, declining only 12% in June compared with the year earlier. The June used SAAR was 36.0 million, down from 39.8 last June but up from 32 million in May. The June used retail SAAR estimate was 18.9 million, down from 21.0 million last year but up from May’s 16.7 million. CPO sales increased 8.6% from a year ago but were up 10.1% from May.
Used prices rise: The Manheim Used Vehicle Value Index increased 8.95% in June from May. Most major market segments saw increases, but luxury cars again outperformed the overall market.
Consumers cut debt, boost savings: Consumers have reduced credit card balances and built up savings so far in this pandemic. Auto credit loosened some in June but remains tighter than before the pandemic and last year for most borrowers, loan types, and lenders.
Credit tightens: An analysis of Dealertrack F&I data shows that auto credit loosened in June, but credit remains tighter than in February before the pandemic began. Approval rates for most credit tiers and loan types improved in June, but approval rates remain lower than February. Declining approvals, tighter standards, and wider spreads mean that we continue to see subprime losing share in new and used loans.
Joblessness remains high: More than 18 million people remain on unemployment benefits, while enhanced benefits are set to expire in three weeks. Initial jobless claims were 1.3 million for the week ending July 3, which was a decline from the prior week’s 1.4 million.
Continuing claims, which represent people who previously filed and were approved and remain on unemployment compensation, fell to 18.1 million from 18.8 million. That represents 11.8% of February’s job total. Continuous claims declined by almost 700,000 from the prior week, which is an improvement from the slight increase we had seen in the prior week’s data.
Consumer sentiment declines: The index of consumer sentiment from Morning Consult declined 0.7% last week and has been trending down since mid-June as COVID-19 daily cases have grown. Consumer sentiment is down by 23.4% compared to the end of February
Check back on Smoke on Cars tomorrow for a video that will include updated data.