Auto Market Weekly Summary

Highlights

• The inflation rate showed unexpected changes, with core CPI showing a year-over-year decrease, reinforcing the notion that inflation is under control.
• The used car market showed significant changes, with used retail sales volume decreasing month over month and wholesale vehicle values declining.
• Auto loan credit accessibility decreased in June, while delinquency and default rates increased.

Inflation: Unexpected Decrease Reinforces Control

According to the CPI, headline inflation declined by 0.1% in June, better than the expected 0.1% increase. This reinforces the belief that inflation is under control.

• Housing saw a decelerating increase to 0.1% from 0.3%.
• Transportation services saw the largest decline of 1.3%, driven by motor fuel, new and used vehicle prices, and airline fare decreases.
• Year over year, core CPI decreased to 3.3% from 3.4% – the lowest since April 2021.

Used Vehicle Market: Decline in Sales and Prices

Our used retail sales estimates, based on vAuto data, indicate that volumes were down 5% month over month while volumes were up 3% year over year.

• Certified pre-owned (CPO) sales declined 8% month over month and were down 7% year over year.
• Wholesale vehicle values declined 0.6% in June on a seasonally adjusted basis, according to the Manheim Used Vehicle Value Index.
• June ended with strength despite the challenges from the CDK software disruptions.

Auto Loan Credit: Decreased Accessibility and Affordability

There has been a decrease in access to auto credit in June across all channels and lender types, according to the Dealertrack Credit Availability Index. In addition, auto loan performance deteriorated as delinquencies and defaults increased.

• The approval rate and yield spreads declined, negatively impacting credit access for consumers.
• The most recent Cox Automotive/Moody’s Analytics Vehicle Affordability Index indicates a decline in vehicle affordability for June.

Auto Loan Performance: Delinquencies and Defaults Increased

Auto loan performance deteriorated in June, as delinquencies and defaults increased.

• In June, 1.81% of auto loans were severely delinquent, an increase from 1.80% in May, but not back to the higher levels we saw in March and February.
• Defaults increased 3.6% in total in June and were up 12.6% year over year.
• The June annualized default rate was 2.92%, 10 basis points (BPs) higher than May and higher than the 2.49% annualized default rate in 2019.
• The year-to-date default rate is 3.07%, which is 17 BPs higher than the default rate in 2019.

Consumer Sentiment: Decline in Positive Outlook

The initial July reading on consumer sentiment from the University of Michigan fell 3.2% to 66.0, marking the lowest level for sentiment since November and down 7.7% year over year.

• Views of current conditions and future expectations both declined.
• Consumers’ views of vehicle prices and interest rates remain very negative.
• Gas prices are flat year over year but up 13.8% year to date.

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.