Recent data suggests our current economic landscape is being heavily influenced by stubborn inflation (still), a seesawing labor market, and bullish corporate earnings. Here's the latest:
The Fed – Inflation is sticking around like a bad habit, forcing the Federal Reserve to hold interest rates steady. Earlier dreams of rate cuts have been pushed to late 2024 at the earliest. It’s a waiting game, with the Fed continuing to treat inflation cautiously before making any moves.
Corporate Earnings – Amidst monetary policy anxieties, corporate America is delivering some good news. A significant chunk of S&P 500 companies have outperformed first-quarter earnings expectations. Strength in sectors like consumer discretionary and health care is hinting at a broader economic resilience that’s buffering the stock market.
Labor Dynamics – The labor market is sending mixed signals—initial data on rising labor costs caused a stir, but a cooler-than-expected April jobs report (adding only 175K jobs against an expected 240K) calmed the waters. This indicates a potential moderation in wage growth, which could help tame inflation.
Up-Tick– The unemployment rate ticked up slightly from 3.8% to 3.9%, with the labor force participation rate holding steady at 62.7%.
April's auto market analysis reveals a mixed bag of trends with fluctuating consumer confidence and diverging vehicle segment performances. Here's what you need to know:
Vehicle Market Values and Sales — The Manheim Market Report indicated a 1.6% drop in the Three-Year-Old Index over April, with a weekly depreciation slightly above the long-term average. Retail used-vehicle sales dipped 4% from March but increased by 9% year-over-year. Interestingly, the average retail listing price for used vehicles rose by 2% in the last four weeks.
Fleet and Rental Market — Fleet sales dropped 5.6% from last April, contributing to an overall new-light-vehicle sales decline of 3.3% year-over-year. Rental risk unit prices saw a 12.2% year-over-year decline, although average mileage dropped slightly by 1.3%.
Segment Performance — Different vehicle categories saw varied year-over-year declines. Compact cars suffered the most, down 17.6%, while luxury vehicles held up relatively better with a 12.9% drop. In contrast, the electric vehicle (EV) segment mirrored this downturn, with a 17.5% decrease, closely tracking the non-EV market's 13.1% decline.
Vehicle sales and financing is showing a significant shift since the beginning of the year, influenced heavily by economic uncertainty and shifting consumer preferences. Here’s a snapshot of the major influencing factors:
Persistently High Interest – Both new and used vehicle markets are contending with high interest rates, continuing an upward trend seen in Q1. Dealerships are increasingly stepping up by leveraging OEM incentives and cultivating lender relationships to offer competitive rates and help customers navigate their purchasing options.
Resiliency in Used Sales – Despite a slight dip in March, used car sales have generally outpaced last year's figures. With improving new vehicle inventories and incentives, further growth in this segment is anticipated.
Lease Deals Gain Popularity – March witnessed the highest percentage of lease deals since July 2021, influencing financing and cash transactions significantly. Attracted by potential savings from manufacturer offers and federal tax credits for electric vehicles, more consumers are opting for leases.
The dynamics of vehicle sales and financing are evolving, influenced heavily by economic uncertainty and shifting consumer preferences. Here’s a closer look:=
Persistently High Interest Rates – Both new and used vehicle markets are contending with high interest rates, continuing an upward trend seen in Q1. Dealerships are increasingly stepping up by leveraging OEM incentives and cultivating lender relationships to offer competitive rates and help customers navigate their purchasing options.
Resilience in Used Car Sales – Despite a slight dip in March, used car sales have generally outpaced last year's figures. With improving new vehicle inventories and incentives, further growth in this segment is anticipated.
Lease Deals Gain Popularity – March witnessed the highest percentage of lease deals since July 2021, influencing financing and cash transactions significantly. Attracted by potential savings from manufacturer offers and federal tax credits for electric vehicles, more consumers are opting for leases.
A recent study by Foureyes has provided a new lens through which U.S. automotive dealerships can gauge the lead-to-sale "efficiency" of their new vehicle inventory for Q1 2024. Here’s a closer look at the findings and implications for dealers:
Lead-to-Sale Analysis – From January to March 2024, the average dealership received 3.5 leads for each vehicle sold, analyzing leads per sold VIN across new 2023 and 2024 models. David Steinberg, Foureyes founder and CEO, emphasized the value of this data in refining dealership strategies: “It’s data dealers can directly apply to their decision-making and processes to gain a competitive jump.”
Efficiency Variances – The study revealed notable differences in efficiency across brands and specific models. Chrysler (5.4 leads), Dodge (5.2), and Land Rover (5.2) were at the lower end of efficiency, requiring more leads per sale. In contrast, Nissan (2.8 leads), Subaru (2.9), and MINI (3.0) boasted the most efficient lead-to-sale ratios.
EV Insights – Among specific models, electric vehicles like the Volkswagen ID.4 and Hyundai Ioniq 5 showed less efficiency with 6.9 and 6.2 leads per sale, respectively. However, vehicles like the Nissan Sentra (2.0 leads per sale), Ford Edge (2.3), and Kia Soul (2.3) were highlighted as particularly efficient.
