July was a month of mixed results in the automotive industry, with some interesting highlights shaping the market landscape. One key aspect that stood out was the average transaction price of new vehicles, which remained almost unchanged from the previous month. At approximately $48,401, this figure represented a mere 0.2% decrease year over year. However, the most striking statistic was the impressive 24.6% increase in average transaction prices since July 2019. This data indicates a significant shift in consumer behavior and preferences towards higher-priced vehicles.
In contrast to new vehicle sales, the used-car market saw a different trend in July. While there was a 5% increase in used-car sales compared to June, year-over-year sales were down by 2%. This shift suggests a changing landscape in the automotive industry, with consumers potentially showing renewed interest in pre-owned vehicles. Certified pre-owned (CPO) sales also experienced a slight uptick of 1% month over month but were down by 9% year over year. The Manheim Used Vehicle Value Index reported a 2.8% increase in wholesale vehicle values, indicating a positive outlook for the used-car market.
One significant factor influencing the automotive market in July was the tightening access to auto credit across all channels. This tightening credit environment has led to an uptick in delinquencies and defaults, signaling a more challenging financial landscape for consumers. The Federal Reserve’s report highlighted a deceleration in consumer credit growth for June, further emphasizing the impact of restricted access to auto credit. Approval rates declined, and yield spreads widened, indicating a more stringent lending environment for potential car buyers.
The increase in delinquencies and defaults in July was particularly concerning, with 60-day+ delinquencies rising for the third consecutive month. Defaults increased by 3.4% in total, with subprime auto loans experiencing a 2.5% increase. The annualized default rate for July was 3.02%, higher than in June and closer to the default rate in 2019. These figures paint a challenging picture for consumers seeking auto loans, highlighting the importance of financial stability and creditworthiness in the current economic climate.
Overall, July presented a complex set of dynamics in the automotive industry, with new vehicle prices holding steady, used-car sales showing growth, and auto credit becoming increasingly restricted. As the market continues to evolve, consumers and industry players alike will need to navigate these changes carefully to make informed decisions and adapt to the shifting landscape.