American Wallets Breathe Sigh of Relief

As inflation takes a chill pill, Americans are finally finding some relief from sky-high prices. However, dealers are still facing hurdles. Here’s what we took away from this week’s report by John Ellis and the Automotive Advisor Team:

📊 Taming Inflation —

• Inflation takes a downward turn, settling at 3% in June.
• Easing gas, airfares, used cars, and groceries prices have contributed to the decline.

📊 The Economy and Retail Outlook —

• The unemployment rate fell to 3.6%, nearing a half-century low.
• There was a mild overall price increase of 0.2% from May to June.
• The average interest rate for a new vehicle increased to 6.58%. The average interest rate for a used vehicle jumped to 11.17%.
• The average loan amount for a new vehicle increased by $1,213 YOY but decreased by $1,590 YOY for a used vehicle.

📊 New Car Outlook —

• The pandemic-driven demand surge has catapulted average new vehicle costs by a staggering 24%, hitting nearly $48K in April.
• The Fed's aggressive interest rate hikes to combat inflation have resulted in typical new-car loan rates soaring to 7% and burdening buyers with a hefty monthly payment averaging $729.

📊 Used Car Outlook —

• People are buying but also holding onto their cars for longer.
• Used cars are selling slightly faster than pre-pandemic, with 60.3 days per vehicle versus 61.5 in 2019.
• The average used vehicle has aged an additional 23%, becoming 7.5 years old and carrying 13% more miles than in 2019 (68,671 vs 60,848).

📊 Wholesale Outlook —

• Wholesale sold prices have surged by 33% since 2019, while the average retail margin has seen a 4% rise compared to 2022.
• The wholesale market shows margin opportunities for dealers who quickly get their cars to the front line.