After the pandemic’s peak, various contributing factors have transformed the automotive industry during the past few years. Jessica Caldwell, Edmunds‘ Executive Director of Industry Insights, joins us on today’s episode of CBT Now to provide an update on the market’s current condition.
Out of all the new factors influencing the market, new vehicle inventory has shown modest growth, according to Caldwell. However, “certain brands are lagging behind and it’s different for every OEM, like their demand is different, production is different, and some areas of the industry are behind with relatively high pricing, consumers are opting for more options, they want larger vehicles, and that naturally will elevate the prices of vehicles.”
Financing
As Caldwell points out, “we are seeing OEMs and their captives trying to entice consumers with finance offerings” since dealers and OEMs aren’t returning to 2019, a period prior to the pandemic. However, because customers are accustomed to low-interest rates, they have a lot of difficulty with the present APRs skyrocketing out of control.
"Six years ago you could acquire a car with low APR and below MSRP, but that just isn't there anymore." - Jessica Caldwell
On the other hand, recent developments in leasing “may change the market as leasing operates off low inventory and subsidize residual value,” according to Caldwell. As inventory grows, she adds, “there may be some vehicles that need to shift value, then leasing could come back.” Additionally, Caldwell asserts, “the fleets that are experiencing pent-up demand will ultimately aid in keeping inventory low.”
Despite the tough economic conditions, consumers still need vehicles. Nonetheless, the present recession, used car prices, loan rates, and housing expenses are all at record highs. Dealers are therefore wary about consumer trade-ins. According to Caldwell, “trading-in vehicles from 2021-2023 is occurring more frequently since consumers bought what was readily accessible at the time, but those vehicles don’t fit for them now. Which results in the trades having negative equity.
