As the dust settles on the 2023 car market, dealers are obsessively watching for signs of change. The year promises to be pivotal for the automotive industry, and even though it just started, storeowners across the country are already trying to predict what the future will bring. Jonathan Smoke is the Chief Economist at Cox Automotive, where he spent nearly six years studying market trends and offering concise, dependable analysis to retailers. On this episode of CBT Now, host Jim Fitzpatrick once again joins Smoke to discuss recent developments, and what they could indicate for the coming months.
Smoke notes that anxieties were high on the outset of the 2023 car market, as many believed the early months would bring trouble to the automotive industry. However, to the surprise of many, January proved to be a strong month for the car business, especially for the used vehicle market. Declining preowned prices have allowed some consumers to reenter the economy, giving the many storefronts a must needed boost, even as it struggles to accept price normalizations. At this point in the year, supply and demand seem to be balancing out, however, Smoke also notes that the first quarter has yet to end, and that basing the financial outlook for the year on one month would be ill advised. Many issues could still interrupt the current growth.
More: What the California car market can tell dealers about 2023 — Brian Maas, CNCDA
To help encourage sales, many automakers are expanding consumer-friendly financing terms, hoping to attract cash-strapped consumers with lower percentage rates. Smoke notes that this strategy has often worked in the car market of the past to supplement decreased revenue due to affordability challenges. Alternative methods to vehicle ownership, such as leasing, also promise to entice drivers who may feel uncertain about an auto loan.
Although challenges still await, Smoke believes that pricing dynamics are on track to improve. However, the rate of recovery will look different for different markets. “…I think we’ve been through the worst of the pressures in [the used car market] last year,” notes Smoke, “and I think we’re starting the year with stronger margins…” On the other hand, average new vehicle prices are still unprecedentedly high, and although certain automakers have cut prices, affordability issues are likely here to stay, at least for the remainder of the 2023 car market’s existence. That being said, Smoke also notes that consumer finances have also stabilized, thanks to the best unemployment rate in decades, creating more car buyers than ever. Although more consumer spending will likely cause the Federal Reserve to prolong its anti-inflationary tactics, the conditions have yet to dissuade buyers.
Overall, Smoke believes that the 2023 car market is in an excellent position at this point in time. However, he warns storeowners against letting their guard down. Dealers will need to carefully consider their operations, stay up to date on the affordability challenges facing consumers and anticipate supply disruptions in order to tackle the year successfully.
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