Tag: J.D. Power

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Dealership Training Economy

Leasing On the Rise Again

Vehicle affordability continues to be the albatross weighing down vehicle sales in 2024. While a  joint forecast from J.D. Power and GlobalData reflects new vehicle sales rising 1.4 percent year-over-year to 1.21 million units, the average listing price in February was projected at $47,142. This amount is down one percent from early 2023. Regardless of this slight decline, when MSRP is combined with perniciously high interest rates, financing a new vehicle is still out of reach for a large part of the buying public.

But there is a trend worth noting that offers a glimmer of hope to the buyer who needs an affordable new vehicle – leasing! The Experian State of the Automotive Finance Market Q4 2023 reflects that the percentage of borrowers who choose to lease is up significantly. Leasing has always been popular with prime and super prime consumers. However, the auto industry saw a jump in subprime and near-prime leases as well.

Leasing Graphic from Experian
Source: Experian State of the Automotive Finance Market Q4 2023 Report
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Economy F&I Industry Trends

2022 Predictions: Demand for Units Bodes Well for Dealers

2021 has felt like a dance with very complex steps, back and forth. In the first half of the year, the economy took a step back with severe semiconductor chip shortages, persistently high levels of COVID-19 infections across the country, and challenging labor shortages. As a result, the seasonally adjusted annualized rate (SAAR) for August dropped to 13.09 million, reflecting a steady decline since the April peak of 18.5 million according to Motor Intelligence. The August reading was the weakest of the year and the lowest since June 2020’s 13.23 million rate, early in the COVID-19 pandemic.

Now, we are experiencing a different story. According to TD Economics, in October, U.S. vehicle sales took a step forward, rising by 6.5 percent month-over-month to 13.0 million SAAR units. Last month’s gain came in well ahead of expectations, which called for a more modest gain to 12.5 million units. These forward steps brought an end to five consecutive months of declines.

However, inventory availability is still taking a step back, putting a false cap on consumer demand. New vehicle inventory remains compressed, with estimates for October revealing that dealership supply slipped to an all-time low of just 20 days. The combination of strong demand and limited inventory has continued to exert upward pressure on new vehicle prices, which are estimated to be up nearly 20 percent from last year’s levels. The October gain indicates that at current depressed production levels, 12 million seems to be the natural floor for sales.

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Dealership Training Economy Industry Trends

Preparing for a Different Kind of Sales Season

It’s officially fall which brings football, cooler temperatures, and 2022 vehicle models. We can predict that at least two of those things are happening this year. New vehicle production challenges continue to linger. Chip shortages, supply chain disruptions and factory shutdowns still plague our need for new inventory.

According to Cox Automotive, only 1.2 million new vehicles were ready to roll onto lots as of July 19th, compared with the average inventory of 3 million. In August, dealers reported just under 1 million new cars on lots, 72 percent lower than August 2019. The major manufacturers have projected production reductions well into the fall, making the new inventory forecast even gloomier.

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