3 Supply concerns plaguing the auto industry in the US — and how to keep them from impacting the shopping experience
The Covid pandemic remains top of mind for most Americans as infections continue to spread across the country. However, sales figures indicate that the auto industry is weathering the latest pandemic challenges reasonably well: total vehicle sales surged to 17.7 million in March – 5% higher than pre-pandemic sales numbers in January 2020.
Even with sales moving in the right direction, though, several issues threaten the stability of the new vehicle market in US in the coming months. Since it pays to be prepared, here’s a look at the supply concerns for the US auto industry that are currently making the news.
New vehicle sales seasonality has always been rather predictable. The end of the fiscal year, the model year changeover, Labor Day, and the end of the year have always led to stronger months in March, May, August/September, and December.
However, during recessions, seasonality trends break from their normal patterns—and this year is no exception. While we know the patterns will be different due to COVID-19, the variation is difficult to predict. That’s because the prolonged impact of the pandemic, which has led to stay-at-home orders, record jobless claims, declining consumer confidence, delayed tax returns, usage of stimulus checks, and increased OEM incentive spend is still relatively unknown. This makes 2020 unlike any other.
Acquiring inventory is fundamental to car selling, but it’s becoming a common challenge year after year. In our recent One Voice Report, 76.3% of used car dealers reported that they found it more difficult to source the inventory they wanted in 2019 compared to 2018. Almost a third (32.8%) rated it as very or extremely difficult. Built around a survey of nearly 1,000 independent and franchise car dealers and our annual Dealer Council meeting, the inaugural CarGurus One Voice Report examines the inventory challenge and how dealers are coping.
2019 was a strong year for the US economy. There was record-low unemployment. Personal savings rates continued to climb. Small business optimism remained high. But 2019 was also full of economic challenges. Costs are rising faster than wages. 59% of Americans live paycheck to paycheck. Rumblings of a possible recession have ebbed and flowed this year. So what does this mean for car dealers in 2020?
At this year’s Navigate conference, George Augustaitis—CarGurus Director of Industry Analytics and Economics—shared the four key macroeconomic trends that will shape 2020 and what dealers should do to prepare. In this video, you’ll learn:
Luxury vehicle sales have been consistently posting strong growth, and it turns out much of that growth may be attributed to first-time buyers, according to findings from the 2019 CarGurus Buyer Insights Report. About three in ten luxury car buyers said that before their most recent purchase, they had never bought a car.
Remember the headlines a few years back that Millennials were delaying buying a car? It seems that now that they’re ready to buy, they don’t want just any car, but rather an aspirational one. Our research found that first-time buyers in luxury are, on average, 29 years old. Additionally, among first-time buyers in luxury:
When it comes to researching and buying a car, CPO buyers are all about being informed and getting their questions answered before making a decision, according to the 2019 CarGurus Buyer Insights Report. They spend hours researching and comparing their options, relying on online resources and experts to give them the confidence they need to purchase a vehicle.
Our Director of Automotive Industry and Economic Analysis, George Augustaitis, provides insight into how forgiveness of student loans could impact vehicle sales in the US.
Debt continues to increase while wages lag, and many Americans struggle to purchase a new car. In fact, affordability represents the most severe headwind causing the decline in vehicle sales, which are down 2.0% calendar year to date (CYTD) 2019.
A recent survey from Bankrate finds that 58% of Millennials and 56% of all Americans lose sleep over money troubles. Today, 40% of Millennials earn at least half their income from a side hustle. Millennials are the largest living adult generation as of 2019, and they represent a key demographic in the success of the new and certified pre-owned (CPO) vehicle market. However, an increasing number of Millennials indicate that cost pushes them away from purchasing a new vehicle. Knowing this, increasing Millennial disposable income would lead to a rise in the new-vehicle market.
For Millennials, student loans represent the primary reason for their low disposable income. An estimated 44.7 million people in the US have student debt, which amounts to 1 in 4 Americans. With the estimated student debt at $1.49 trillion and the average monthly payment at $393, the increasing amount of student debt shapes affordability significantly more than wages, housing costs, and the rising price of vehicles.
Because of the new-vehicle sales slowdown during the Great Recession, finding affordable used-vehicle inventory has been a challenge for today’s dealers. Automotive News dug into CarGurus analysis to offer insight into the impact on the current car-buying market. Check out the full article:
For many drivers, getting in the car follows a routine: use a key fob to unlock the car door, get into the driver’s seat, connect a smartphone to the car’s infotainment system, and then drive off. Yet, when tested on their knowledge of connected vehicle security, consumers were wrong on half the answers, scoring a failing average of 49%.
At CarGurus, we’re always looking for ways to share more industry insights with our valued dealers. Today, our Director of Automotive Industry and Economic Analysis, George Augustaitis, takes a look at how tax cuts and dwindling inventory are affecting the used car market.
The IRS started to release information on tax returns in the first week of February. As the data from the IRS changed over time, the media released weekly headlines, whipping back and forth between negative and positive:
To date, the IRS has reported filings through the week ending May 10, 2019, and at first glance, the average refund is down 1.7%.
While the key metrics—total number of refunds, amount of money issued, and average refund—show a negative story, refunds alone aren’t the factor driving change in used car sales in the US.