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Year-end sales events are traditionally one of the best times of the year to buy a new vehicle. Manufacturers and dealers are offering some of their best incentive packages as they look to
close out the calendar year by clearing out stocks and posting annual sales figures important to Wall Street in assessing a company’s value.
This year, shoppers are likely to find more incentives like lease deals to go along with more choices. Tighter supplies because of pandemic production shutdowns and chip shortages meant higher prices and very little in the way of incentives over the past two years. With manufacturers getting a handle on the chip shortage, production is returning to more normal levels, which means inventories are growing.
According to Cox Automotive, there are currently 1.64 million vehicles in stock, up 774,000 units from a year earlier. While that number is significantly lower than the 3.55 million vehicles on hand in November 2019, greater supplies increase the chance of finding a new vehicle that fits your needs.
“A real dichotomy has emerged,” said Charlie Chesbrough, Cox Automotive’s senior economist. “Asian brands have super tight inventories while not so much for domestic brands. In 2023, we’ll be looking for heftier incentives to kick in for some brands and in some segments – particularly pickup trucks.”
Among those makes with the tightest supplies are Kia, Toyota, Honda and Subaru. Brands with more vehicles on hand include Buick, Jeep, Dodge, Ram as well as luxury brands like Infiniti, Jaguar, Lincoln and Volvo. So, if you’re shopping for a full-size pickup, you’re likely to have more success in finding a Ram than say a Ford F-150 or Chevrolet Silverado.
On the other hand, the tightest supplies are on entry level cars costing less than $20,000. According to Cox Automotive, there’s only a 21 days’ supply of these vehicles. The days’ supply figure is how many days it would take the current sales rate to sell all the vehicles currently in stock. In the $20,000-$30,000 category, that supply grows to 35 days. A normal days’ supply
figure is 60.
“Timing is everything,” said Charlie Chesbrough, Cox Automotive’s senior economist. “Production is finally ramping up after being stymied by the chip shortage just as demand started to waiver and vehicle sales slowed down.”
Part of that sales slowdown is from high prices. Kelley Blue Book said the average transaction price of new vehicles hit a record $48,681 in November. Because of the high prices and lower demand buyers are beginning to see more incentives in the form of lease deals, some cash back and lower finance rates.
Buyers not only have to contend with record prices, credit availability and interest rates also remain a big concern. The Dealertrack Credit Availability Index compiled by Cox Automotive shows a 2.6-percent drop in loan availability in November. And with the most recent half-point boost in interest rates, the average loan cost will go higher.
After the 0.75 percent bump in August, Bankrate.com reported that the average loan rate jumped from 4.94 to 5.66 percent on a 60-month contract. This means the average loan rate soon could top 6 percent.
While higher new vehicle costs and interest rates can be offset by historically high trade-in and resale values of currently owned vehicles, those values may also begin to fall.
Manheim Auctions, which compiles a wholesale used value index, is seeing a drop, with a 14.2 percent decline in November values over a year earlier. Lower values at auction means that dealers may soon begin offering less for cars they take in trade or buy outright.
The bottom line here is that while new vehicle availability is improving with higher inventories and manufacturers are more willing to be more generous with their incentives, strong headwinds remain in the market in the form of higher sticker prices, higher interest rates and potentially lower vehicle resale values. The result is an equal mix of opportunities and challenges for the smart shopper.
According to Cox Automotive, there are currently 1.64 million vehicles in stock, up 774,000 units from a year earlier. While that number is significantly lower than the 3.55 million vehicles on hand in November 2019, greater supplies increase the chance of finding a new vehicle that fits your needs.
Increased Availability Not Universal
However, the increase in inventories doesn’t necessarily translate to more across-the-board availability. There are still some segments and makes that are more popular than others, so bargain hunters have some work to do.“A real dichotomy has emerged,” said Charlie Chesbrough, Cox Automotive’s senior economist. “Asian brands have super tight inventories while not so much for domestic brands. In 2023, we’ll be looking for heftier incentives to kick in for some brands and in some segments – particularly pickup trucks.”
Among those makes with the tightest supplies are Kia, Toyota, Honda and Subaru. Brands with more vehicles on hand include Buick, Jeep, Dodge, Ram as well as luxury brands like Infiniti, Jaguar, Lincoln and Volvo. So, if you’re shopping for a full-size pickup, you’re likely to have more success in finding a Ram than say a Ford F-150 or Chevrolet Silverado.
On the other hand, the tightest supplies are on entry level cars costing less than $20,000. According to Cox Automotive, there’s only a 21 days’ supply of these vehicles. The days’ supply figure is how many days it would take the current sales rate to sell all the vehicles currently in stock. In the $20,000-$30,000 category, that supply grows to 35 days. A normal days’ supply
figure is 60.
“Timing is everything,” said Charlie Chesbrough, Cox Automotive’s senior economist. “Production is finally ramping up after being stymied by the chip shortage just as demand started to waiver and vehicle sales slowed down.”
Part of that sales slowdown is from high prices. Kelley Blue Book said the average transaction price of new vehicles hit a record $48,681 in November. Because of the high prices and lower demand buyers are beginning to see more incentives in the form of lease deals, some cash back and lower finance rates.
Demand Softens Amid Interest Rate Concerns
The current round of incentives might not be enough to lift sales. According to the Conference Board of Consumer Confidence, the number of people planning to buy a new vehicle in the next six months is down 3.2 percent over a year ago. Further slowing of the market could result in even better incentives.Buyers not only have to contend with record prices, credit availability and interest rates also remain a big concern. The Dealertrack Credit Availability Index compiled by Cox Automotive shows a 2.6-percent drop in loan availability in November. And with the most recent half-point boost in interest rates, the average loan cost will go higher.
After the 0.75 percent bump in August, Bankrate.com reported that the average loan rate jumped from 4.94 to 5.66 percent on a 60-month contract. This means the average loan rate soon could top 6 percent.
While higher new vehicle costs and interest rates can be offset by historically high trade-in and resale values of currently owned vehicles, those values may also begin to fall.
Manheim Auctions, which compiles a wholesale used value index, is seeing a drop, with a 14.2 percent decline in November values over a year earlier. Lower values at auction means that dealers may soon begin offering less for cars they take in trade or buy outright.
The bottom line here is that while new vehicle availability is improving with higher inventories and manufacturers are more willing to be more generous with their incentives, strong headwinds remain in the market in the form of higher sticker prices, higher interest rates and potentially lower vehicle resale values. The result is an equal mix of opportunities and challenges for the smart shopper.
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