From The Newsroom - Cox Automotive September 13, 2022

Welcome to From the Newsroom, a roundup of news from Cox Automotive and perspectives from its analysts and experts on topics dominating the automotive industry.

Like football fans, auto dealers are usually excited about the fall and eternally optimistic – anticipating success every season. According to the Q3 Cox Automotive Dealer Sentiment Index, this fall is different. U.S. automobile dealer sentiment in the third quarter reflects that more dealers view the current market as weak than strong. The 3-month, forward-looking market outlook index also dropped from the previous quarter and is at a record low for the index, back to levels last seen at the onset of the pandemic.

Inflation is likely weighing heavily on dealers, the data indicates. The Consumer Price Index reported this morning is showing signs of inflation slowing – or at least not increasing rapidly anymore. Through the spring, there were big month-over-month gains, but July was a 0% gain, and August was only a 0.1% gain month over month. Still, in the Auto Market Report published this morning, Cox Automotive Chief Economist Jonathan Smoke notes, “The Fed looks very likely to push interest rates another 75 Basis Points next week, which is probably too much for the economy to handle.” (Drops mic...)

In this newsletter, we also report another record for new-vehicle average transaction pricing in August, according to Kelley Blue Book, and the latest on wholesale used-vehicle prices in the Manheim Used Vehicle Value Index, a key indicator for what is coming in the retail used-vehicle market.

The latest data and industry insights are increasingly important as we head into the fourth quarter. Register now for the Q3 Cox Automotive Industry Insights and Forecast Call on Wednesday, September 28. Smoke and the team will review all the key metrics for the quarter and provide valuable insights into affordability, declining sentiment, demand, inflation and the possibility of recession.

We hope you find this selection of articles informative and helpful. Visit the Cox Automotive Newsroom for the latest on the industry’s most important topics, and bookmark the Auto Market Snapshot, a one-stop dashboard for the data our team is tracking.

COX AUTOMOTIVE DEALER SENTIMENT INDEX: U.S. AUTO DEALERS SEE MARKET WEAKNESS DRIVEN BY INFLATION, ECONOMIC ANXIETY AND TIGHT INVENTORY, MARKET OUTLOOK HITS RECORD LOW

U.S. automobile dealer sentiment in Q3 2022 reflects that more dealers view the current market as weak than strong. Now, at 49, the current market index is below the threshold of 50 in the Cox Automotive Dealer Sentiment Index (CADSI), marking the fifth quarter-over-quarter decline in overall market sentiment. The index is down five points from Q2 and down 13 points year over year. The current market index was last below 50 in Q1 2021; it peaked at 67 in Q2 2021. U.S. auto dealers indicate that their negative view of the market is influenced by inflation, economic anxiety, and tight inventory.

The 3-month, forward-looking market outlook index dropped sharply from the previous quarter and, at 44, is at a record low for the index, back to levels last seen at the onset of the pandemic in Q2 2020 and well below the 60 recorded in Q3 2021. The quarter-over-quarter decrease in market outlook, however, was driven more by independent dealers, with a 10-point drop to 40, equal to the lowest level last recorded at the start of the pandemic. Franchised dealers’ outlook was also down quarter over quarter but by only five points.

Read the press release to learn more, including the top factors holding back business. Download the report.

RECOVERY STALLED AS INFLATION HAS SURGED

The Back to Normal Index declined over the last week and is down 8.8% since the start of the pandemic. The recovery has generally stalled out as inflation has surged, according to Cox Automotive Chief Economist Jonathan Smoke in the Auto Market Report published this morning. However, data still show no clear sign of a substantial pulling back of consumer-driven activity.

Access to auto credit declined for the fourth straight month in August, according to the Dealertrack Credit Availability Index for all types of auto loans, reflecting that auto credit was harder to get compared to July. With the decline in August, access was looser by 4.0% year over year, and compared to February 2020, access was looser by 3.4%.

Read the Auto Market Weekly Summary and watch the Auto Market Report video for more data and insights from Smoke on new and used retail sales and inventory, depreciation patterns and Cox Automotive leading indicators.

NEW-VEHICLE PRICES INCREASE FOR FIFTH STRAIGHT MONTH, SET RECORD AGAIN IN AUGUST, ACCORDING TO KELLEY BLUE BOOK

The average price paid for a new vehicle in the U.S. in August hit a record high at $48,301, according to Kelley Blue Book, up $222 from July and up $4,712 from August 2021.

Non-luxury, luxury and electric vehicle (EV) average transaction prices all hit record highs in August. The average price paid for a new non-luxury vehicle last month was $44,559. The average luxury buyer paid $65,935. The average price paid for a new EV rose to $66,524 in August, aligning more with luxury prices versus mainstream prices. The average price for an EV is up $138 compared to July and up $8,984 versus a year ago.

Check out the Data Point published yesterday for more details including the average price paid by manufacturer and make as well as the average incentive spend as a percent of ATP.

WHOLESALE USED-VEHICLE PRICES DECLINE SUBSTANTIALLY IN AUGUST

Wholesale used-vehicle prices decreased 4.0% in August from July. The Manheim Used Vehicle Value Index declined to 210.8 but is up 8.4% from a year ago. The non-adjusted price change in August was a decline of 2.6% compared to July, leaving the unadjusted average price up 5.9% year over year.

All major market segments saw seasonally adjusted prices that were higher year over year in August, except for full-size cars. Compact cars had the largest increase at 15.9%, followed by vans and midsize cars, which all had seasonally adjusted year-over-year gains ahead of the overall industry. Compared to July, all eight major segments’ performance was down. Sports cars lost nearly 5%, while compact and midsize cars declined 3.5% and 3.0%, respectively. SUVs were down 4.3%, and vans were down 2.9%.

Read the Data Point for details on how buyers had more bargaining power for this time of year. Register to attend the Q3 Manheim Used Vehicle Value Index Call on Friday, October 7.

REGISTER NOW TO ATTEND TO Q3 INDUSTRY INSIGHTS AND FORECAST CALL

The Cox Automotive Q3 Industry Insights and Forecast Call will be held on Wednesday, September 28, 11 a.m. EDT, shortly before the auto industry closes the book on the third quarter.

Our experts and analysts, led by Chief Economist Jonathan Smoke, will provide insights and data to help quantify how the consumer, the industry and the economy performed in Q3. We will review our 2022 forecasts and will share how we see the industry progressing through the end of the year.

Looking ahead: The Monthly Industry Update video from the Industry Insights team will be published on Wednesday, September 14. The August Cox Automotive/Moody’s Analytics Vehicle Affordability Index will be published on Thursday, September 15. And look for updates to inventory and listing prices for both the new- and used-vehicle markets, both of which will be shared in the coming days.

Next week, the mid-month Manheim Used Vehicle Value Index will be reported on Tuesday, September 20. Check back in the Newsroom for the latest Xtime service metrics as well. Plus, the Fed will be meeting, and commentary from Jonathan Smoke will be published on Wednesday, September 21.

If you have questions or want to connect with the Cox Automotive PR team in the meantime, feel free to contact us.

AUTO QUOTES

“Importantly, a drop in current-market sentiment is not typical in the third quarter. The third quarter is usually mostly stable and, for franchised dealers, is often improving. There is typically excitement building with new models rolling out and energy for the new-vehicle market through the fourth quarter and holiday seasons. That is just not the case this year.”

– Jonathan Smoke, chief economist, Cox Automotive. Read t he press release for details.