Understanding Current Trends in the Auto Industry

If you’re in the market for a new car, here’s what you should know ahead of time.

1. High Prices Weighing on Sales

Consumers are facing challenges as vehicle prices remain high, leading many to hold off on purchases. Consequently, those looking to buy are waiting for a downturn in prices or a reduction in interest rates by the Federal Reserve. However, experts believe it could be a prolonged wait before any meaningful cuts are made to interest rates, particularly before the upcoming elections.

2. Car Prices, Both New and Used, Will Soften

Over the remainder of the year, we anticipate continued declines in both new and used car prices:

• New cars are currently selling at about 97% of their list price on average.
• Financial incentives have returned, now averaging around 7% of transaction prices.
• Used car prices have decreased by 23% since their peak in 2022.

3. Better Deals for 2024 Models

As 2025 models begin to roll out, consumers can expect increased deals on the remaining 2024 models still available at dealerships, along with significant discounts on the few 2023 vehicles remaining in inventory.

4. Leasing Trends Indicate Future Deals

The increase in leasing and fleet sales now suggests that many leased vehicles will later resurface as certified pre-owned (CPO) options. Historically, CPO vehicles are appealing to budget-conscious buyers due to their low mileage and warranty options.

5. Financing Costs Impacting Buyers

With the average new car loan rate at 7.3% and 11.5% for used cars, higher financing costs are discouraging many potential buyers, particularly those with less-than-prime credit. Furthermore, the delinquency rate on loans has risen to 8%, up from 5% last year. Conversely, affluent buyers, benefiting from higher stock and home values, are increasingly opting to pay cash for their vehicles.

6. Strong Demand for Hybrids

Hybrids continue to be popular, particularly with Toyota and Honda leading the market. As a result, consumers may find fewer bargains in this segment, but plug-in hybrids are gaining traction as well.

7. Electric Vehicle Sales Stabilizing

Currently, sales of electric vehicles (EVs) account for approximately 7% of the market. There is still a considerable supply available at dealerships, and with leasing rates high among EVs, a glut of used models can be expected in the future. While many consumers are hesitant to invest in EVs now, there is potential for reconsideration in the coming years as technology and infrastructure improve.

Stay informed about the auto industry to make the most of your investment decisions. For a more comprehensive understanding of market trends, consider exploring resources that provide insights into evolving economic conditions.

This forecast highlights essential trends in the auto industry, providing valuable insights that help consumers navigate their vehicle purchasing decisions effectively.