Auto Market Weekly Summary: December 12

Consumer credit growth accelerated in October as revolving credit increased but non-revolving credit declined. Auto loan credit access tightened sharply in November across all channels and across all lender types as every factor moved against consumers.

Used-vehicle sales likely declined in November, and wholesale used-vehicle prices declined again. The Manheim Used Vehicle Value Index is now down 14.2% year over year.

Consumer sentiment increased to start December, according to the University of Michigan and according to the daily index of consumer sentiment from Morning Consult. The average price of gasoline closing to the lowest level for the year boosted confidence.

Borrowing Mixed and Auto Credit Tightens Sharply in November

The Federal Reserve reported that Consumer Credit excluding housing-related saw growth increase to $27.08 billion in October from $25.82 billion in September. Credit cards saw gains while non-revolving debt (auto and student loans) saw declines.

Auto credit access tightened sharply in November. Our Dealertrack Credit Availability Index declined 2.6%, as every factor worked against consumers as the approval rate declined, yield spreads widened, the subprime share declined, terms shortened, and the share of loans with negative equity declined. Credit tightened across all loan channels and all lender types with new loans tightening the most and credit unions tightening the most across lenders.

Used-Vehicle Retail Sales Dip

Our same-store estimates on Dealertrack indicate that used retail sales declined 1% in November from October and were down 10% year over year. Certified pre-owned (CPO) sales declined 4% month over month in November but were up 10% year over year. Credit transactions heavily influence the same-store data series, and growth in cash purchase activity is likely causing the estimates to decline more than actual market sales.

Using estimates of used retail days’ supply based on vAuto data, November ended at 47 days’ supply, down from 53 days at the end of October but higher than how November 2021 ended at 44 days. Leveraging Manheim sales and inventory data, wholesale supply is estimated to have ended November at 29 days, higher than how November 2021 ended at 24 days but unchanged from the end of October.

Wholesale Used-Vehicle Prices Slip Again in November

Wholesale vehicle values, according to the Manheim Used Vehicle Value Index, declined 0.3% in November on a seasonally adjusted basis. The decline left the Index at 199.4, which was down 14.2% from a year ago. The unadjusted price change in November was a decline of 1.6%, leaving the unadjusted average price down 12.4% from a year ago.

In November, Manheim Market Report (MMR) values saw larger-than-normal declines, culminating in a 2.2% total decline in the Three-Year-Old Index over the last four weeks. All eight major market segments saw seasonally adjusted prices that were lower year over year. Compact cars had the smallest decline at 10.5%, followed by vans and sports cars, both at 11.6%, and pickups at 11.9%.

Consumer Sentiment Rises; Gas Prices Decrease Again

The initial December reading on consumer sentiment from the University of Michigan increased 4% to 59.1 as views of current conditions and future expectations both increased. Median expected inflation rates declined one year out and were steady over the next 5 years.

Consumers’ views of buying conditions for vehicles improved and was the second-best reading since March. June was the all-time low in the reading.

The improvement in the Michigan index is consistent with the improvement in the daily index of consumer sentiment from Morning Consult. That index is up 2.4% so far in December as of last Friday.

Sentiment has been improving this fall as gas prices have been steadily declining. The average price for unleaded gasoline was down 3.9% from the previous week as of last Thursday to $3.32 per gallon, which was the lowest price since mid-January. The year started at $3.29, so another week like this one and the year will end with the cheapest gas prices.

Join us for the 2023 Cox Automotive Industry Insights and Forecast Call hosted by Chief Economist Jonathan Smoke and the Industry Insights team on Thursday, January 12, at 11 a.m. EST. During this 90-minute session, you will hear how the auto industry performed in 2022 and how the Cox Automotive team sees the industry progressing in the new year.

Jonathan Smoke is the chief economist at Cox Automotive.