Wall Street Journal - Dealership Corridor

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

For much of the country, the sights and sounds of spring have begun. This year, those green shoots of renewal come with an extra boost of optimism. Temperatures are warming, vaccine distribution is rolling out, and COVID-19 cases are trending down across much of the country. A third round of stimulus checks and income tax returns are hitting consumer bank accounts. Other signs of economic recovery are also evident, including a February rise in total nonfarm payroll employment by 379,000, largely attributed to gains in service and hospitality jobs. The Conference Board Consumer Confidence Index for February continued its upward rally, reflecting consumer’s general optimistic outlook.

With all of these positive economic signs, the retail automotive market should be primed for a great spring. But there are two sides to the story, both hinging on inventory of new and used vehicles. With caution, dealers will need to closely monitor both sides of the equation, as well as listen closely to buyer attitudes to capitalize on the positive trends.

New vehicle inventories are facing an unusual challenge. While factories have returned to work, pandemic-related global supply chain challenges are hindering parts availability. From plastics to semiconductor chips, manufacturers are left trying to source substitute parts, or simply waiting for deliveries. Dealers who are normally looking for space to house new vehicles at this time are faced with too few units. Consumers flush with extra cash are forced to either wait for their car of choice or pre-order vehicles months in advance. A recent Wall Street Journal article characterizes the situation well, indicating the forecasted retail automotive rebound is being hamstrung by situations thousands of miles away.