Auto Market Weekly Summary

Key Highlights

• Inflation has remained mostly stable, with some notable exceptions, including a surge in transportation services.
• Used retail sales have significantly increased, with volumes rising across the board.
• Consumer credit growth has seen its most substantial month-over-month escalation in nearly two years, impacting access to auto credit.

Inflation and Auto Pricing

Headline inflation, according to the consumer price index (CPI), increased by 0.2% in August, as expected, with the core CPI, excluding food and energy, seeing a more-than-expected growth of 0.3%. Interestingly, new-vehicle prices remained stagnant while used-vehicle prices slid by 1%. On a year-over-year basis, core CPI remained at 3.2%, the lowest since April 2021.

• Shelter was the primary driver of this inflation acceleration, increasing to 0.5% from 0.4%.
• Transportation services was an exception, growing by 0.9% due to hikes in motor vehicle maintenance and repair, insurance, and airline fares.
• Retail new vehicle prices saw a slight downtrend, with increased incentives, countered by a rise in used retail vehicles and an increase in wholesale prices.

Used Retail Sales and Vehicle Values

Used retail sales shot up in August, with volumes rising 34% compared to July and 21% year over year. Certified pre-owned (CPO) sales also witnessed an 11% month-over-month increase, albeit a 4% year-over-year decline.

• The Manheim Used Vehicle Value Index posted a month-over-month increase in August, reaching 203.9, signifying a 3.9% year-over-year decrease.
• Wholesale vehicle values, on a seasonally adjusted basis, rose by 1.2%.
• The unadjusted average price in August was down 4.6% year over year.

Consumer Credit

Consumer credit excluding mortgages saw substantial reacceleration in growth in July for the largest monthly gain in almost two years, according to the latest report by the Federal Reserve. Consumer credit grew by $25.45 billion, up from June’s downwardly revised $5.23 billion increase.

Auto Credit Access and Loan Performance

Access to auto credit decreased in August across most sectors and lender types, according to the Dealertrack Credit Availability Index. Banks have become the most restrictive year over year, whereas auto-focused finance companies have been the least. Auto credit is likely to remain tight because auto loan performance continues to be weak, but at least defaults are declining.

• 60-day+ delinquencies increased to 1.96% in August for the fourth month in a row and were up 5.9% year over year.
• In August, 7.41% of subprime loans were severely delinquent, which was up from 7.23% in July.
• Defaults declined 3.0% in total in August, down 9.1% year over year, while defaults of subprime auto loans declined by 1.7% and were down 15.1% year over year.

Consumer Sentiment

September’s initial reading from the University of Michigan index showed a 1.6% increase to 69.0 in consumer sentiment, the highest since May. Views on current conditions and future expectations both improved, with sentiment toward vehicle purchasing reaching its best level since June 2021.

• Expectations for one-year inflation dropped to its lowest since December 2020, at 2.7%.
• Conversely, five-year inflation expectations rose to 3.1%, the highest since November 2020.
• Gas prices have fallen 3.1% month over month and are 16% lower year over year but have risen 3.9% 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.