Car Market Update For New & Used Vehicles | Watch Before Buying | Summer 2024

Summary

The Car Edge update for Summer 2024 discusses the new and used car market trends, emphasizing days supply of inventory as a key indicator for buyers. New car prices are expected to decrease with increased inventory, while used car prices have already dropped by 5%. Brands with high inventory like Infiniti, Chrysler, and Dodge are likely to offer aggressive incentives. Conversely, brands with lower inventory, such as Kia and Toyota, may see less negotiation room despite recent sales declines. The script highlights a buyers' market for new cars, especially with increased incentives and fair valuations, while the used car market remains challenging due to high prices and negative equity issues, except for used EVs which have seen significant depreciation.

Takeaways

• 🚗 The new car market is expected to see an increase in days supply, indicating more cars available than customers, potentially leading to better deals for shoppers.
• 📉 The average listing price for new cars has slightly decreased, with the most recent data showing a transaction price of $47,214 in April.
• 🔍 Day supply is highest among the most expensive vehicles and lowest for more affordable ones, suggesting a challenging market for those seeking vehicles under $40,000.
• 🛍️ Brands with high inventory like Infiniti, Chrysler, Volvo, and others are likely to offer more aggressive discounts and APR incentives due to oversupply.
• 📈 Brands such as RAM, Chrysler, Dodge, and Jeep have seen MSRP increases of over 50% in the past 5 years, which is significantly higher than the inflation rate.
• 🏷️ Brands with lower inventory like Kia, Honda, Subaru, Lexus, and Toyota have not raised their prices as dramatically, offering better value for consumers.
• 🔑 Kia has experienced sales declines for five months in a row, suggesting they may be more motivated to sell despite having a shorter day supply.
• 📉 Used car prices have dropped by about 5% in 2024, but the average transaction price is still over $22,500, remaining unaffordable for many.
• 🚦 The used car market is expected to remain tight with a 44-45 days supply, influenced by the chip shortage that affected new car production.
• 🔌 There is a significant depreciation in used electric vehicles (EVs), making it an opportune time to purchase a pre-owned EV.
• 💳 High negative equity due to overpayment during the pandemic has resulted in many potential buyers being unable to afford loans for used cars.

Q & A

What is the primary focus of the Car Edge auto market update?

The primary focus of the Car Edge auto market update is to discuss the trends in the new and used car markets, specifically addressing the days supply of inventory, average listing prices, and the current state of APRs (Annual Percentage Rates).

What does 'days supply of inventory' indicate for consumers in the new car market?

The 'days supply of inventory' indicates the number of days it would take to sell all available current inventory based on the daily sales rate. A longer day supply suggests more cars than customers, potentially leading to better deals for consumers, while a shorter supply indicates more customers than cars, making it harder to negotiate deals.

What is the current industry average for days supply of new cars in the United States?

The current industry average for days supply of new cars in the United States is 72 days.

What is expected to happen to the days supply of new vehicles over the summer of 2024?

It is expected that the days supply of new vehicles will continue to increase over the summer of 2024, which could lead to more inventory than customers and potentially better deals for new car shoppers.

What was the average transaction price for a new car as of April in the script?

The average transaction price for a new car as of April was $47,140.

Which brands are mentioned as having the most oversupplied inventory and therefore potentially offering better deals?

The brands with the most oversupplied inventory mentioned in the script are Infiniti, Chrysler, Volvo, Ram, Dodge, Ford, Lincoln, Buick, Jeep, Audi, and Alfa Romeo.

How have the MSRPs for RAM, Chrysler, Dodge, and Jeep changed over the past 5 years according to the script?

According to the script, the MSRPs for RAM, Chrysler, Dodge, and Jeep have increased by more than 50% over the past 5 years.

What is the current average transaction price for a used car as of the time the script was filmed?

The current average transaction price for a used car as of the time the script was filmed is over $22,500.

What is the expected trend for used car prices in the summer of 2024 according to the script?

The script expects used car prices to continue to decrease, with a particular emphasis on the depreciation of used electric vehicles (EVs), making it a good time to purchase a pre-owned EV.

What challenges are consumers facing regarding negative equity in the used car market?

Consumers are facing significant negative equity, with the latest data indicating over $6,000 in negative equity on average. This is making it difficult for many to get approved for a loan or to roll over their negative equity onto the next car loan.

What is the current average interest rate for a new car loan as mentioned in the script?

The current average interest rate for a new car loan as mentioned in the script is a little bit above 9%.

Outlines

00:00

🚗 Auto Market Update for Summer 2024

The video script opens with an introduction to the Car Edge's quarterly auto market update. The speaker, along with his father who has 43 years of experience in the car industry, discusses the state of the new and used car markets in Summer 2024. The focus is on the days supply of inventory, which is a crucial indicator for consumers looking to buy a car. A higher days supply suggests more cars than customers, potentially leading to better deals. The industry average is 72 days supply, with some brands having significantly more. The script predicts an increase in days supply over the summer, which may lead to a decrease in new car prices. Brands with the most inventory, such as Infiniti, Chrysler, and others, are likely to offer the best deals due to their oversupply. However, these brands have also significantly increased their MSRPs, which may offset the benefits of a good deal. Brands like Kia, Honda, and Toyota have less inventory and have not raised their prices as dramatically, making them potentially more attractive options for buyers.

05:00

📉 New and Used Car Market Trends and Buying Advice

This paragraph delves into the specifics of the new car market, noting that while the average listing price for new cars has slightly decreased, the day supply is highest among the most expensive vehicles. The script suggests that consumers can expect aggressive incentives from brands with high inventory, such as Infiniti, Chrysler, and Dodge, which have raised their MSRPs significantly over the past five years. It also mentions that brands with lower inventory, like Kia, Honda, and Toyota, may not offer as many incentives but could be more motivated to sell due to recent sales declines. The script advises consumers to say no to market adjustments and to look for fair value in the current market, particularly from Subaru, Kia, Nissan, Chevrolet, and Mazda. It also touches on the overall increase in new car inventory, the expectation of further growth over the summer, and the impact of this on market dynamics and incentives offered by manufacturers.

10:01

🔋 Used Car Market Analysis and Challenges

The final paragraph of the script shifts focus to the used car market, where prices have dropped by about 5% but remain high, with the average transaction price for a used car still exceeding $22,500. The script notes that the used car market is typically slower in the summer months following the busy tax season. It also points out that used car inventory levels are tight due to the chip shortage's impact on new car production, which in turn affects the supply of used cars. The script highlights that electric vehicles (EVs) have seen a significant drop in prices, making it an opportune time to purchase a pre-owned EV. However, it also discusses the challenges faced by consumers with negative equity, which is preventing many from entering the used car market due to the inability to roll over large amounts of negative equity into new loans. The script concludes with a note on the increase in repoed vehicles at dealer auctions, which adds to the supply but often at the cost of lower quality.

Keywords

💡Car Market Update

A 'Car Market Update' refers to the latest information and trends regarding the automotive industry, specifically the buying and selling of new and used cars. In the video, the host provides an update on the state of the new and used car markets, discussing inventory levels, pricing trends, and consumer opportunities. The update is crucial for understanding the current dynamics of the car market, which is the central theme of the video.

💡Days Supply

The term 'Days Supply' is a measure of inventory availability in the car market, indicating the number of days it would take to sell all current inventory based on the daily sales rate. In the script, it is highlighted as the most important metric for consumers to understand when buying a new or used car, as it reflects the balance between supply and demand. A higher days supply suggests more cars than customers, potentially leading to better deals for buyers.

💡New Car Market

The 'New Car Market' pertains to the segment of the automotive industry where brand-new vehicles are sold to consumers. The video discusses the new car market's current state, including the days supply of new vehicles and the average listing price. The host predicts an increase in days supply and a slight decrease in new car prices, which are significant factors for consumers considering the purchase of new vehicles.

💡MSRP

MSRP stands for 'Manufacturer's Suggested Retail Price,' which is the price at which a manufacturer recommends that a car be sold. In the video, the host mentions that MSRPs for certain brands have increased significantly over the past five years, which affects the affordability of vehicles. The discussion around MSRP is essential for understanding the pricing strategy of car manufacturers and its impact on consumer purchasing power.

💡Inventory

Inventory in the context of the car market refers to the current stock of vehicles available for sale. The script discusses inventory levels for both new and used cars, noting that new car inventory is expected to continue to rise, which could influence the bargaining power of dealers and the availability of deals for consumers.

💡Incentives

In the car market, 'Incentives' are special offers or discounts provided by manufacturers or dealers to encourage the purchase of vehicles. The video mentions that manufacturers are expected to increase incentives, such as percentage discounts off MSRP and APR incentives, to attract buyers in the face of rising inventory and competition.

💡APR

APR stands for 'Annual Percentage Rate,' which is the annual interest rate charged on car loans. The script provides an update on APRs, noting that they are currently quite high, which can affect the affordability of vehicles for consumers. Understanding APRs is important for consumers when considering the total cost of owning a car.

💡Used Car Market

The 'Used Car Market' is the segment of the automotive industry where previously owned vehicles are sold. The video discusses the current state of the used car market, including price trends and inventory levels. It notes that prices have come down slightly but are still high, and that the market is characterized by a shortage of quality used cars.

💡Negative Equity

Negative equity occurs when a consumer owes more on a car loan than the car is currently worth. In the video, the host mentions that many consumers are facing significant negative equity, which can make it difficult for them to trade in their vehicles and purchase new ones. This concept is important for understanding the challenges faced by consumers in the current used car market.

💡EV

EV stands for 'Electric Vehicle,' which refers to cars that are powered by electric motors rather than internal combustion engines. The script highlights that EVs have experienced significant depreciation in value, making the pre-owned market a potentially attractive option for consumers interested in purchasing an EV. The discussion of EVs is relevant to the video's theme as it identifies a specific segment of the market with unique opportunities.

💡Repo

A 'Repo' or repossessed vehicle is a car that has been returned to a lender because the owner has defaulted on their loan payments. The video mentions an increase in repo vehicles at dealer auctions, which contributes to the supply of used cars but also raises concerns about the quality of these vehicles. Understanding the role of repo vehicles is important for consumers navigating the complexities of the used car market.

Highlights

Car Edge provides an auto market update every quarter.

Days supply of inventory is a crucial metric for new or used car buyers, indicating the balance between available cars and customers.

The industry average for new car days supply is 72, with some brands having significantly more or less.

New car market expects an increase in days supply over the summer of 2024.

The average listing price for new cars has slightly decreased to $47,140 in April 2024.

Brands with high days supply and increased MSRPs include Infiniti, Chrysler, Volvo, Ram, Dodge, Ford, Lincoln, Buick, Jeep, Audi, and Alfa Romeo.

These brands are expected to offer aggressive incentives and APR deals during the summer months.

Brands with the least inventory and more stable pricing include Kia, Honda, Subaru, Lexus, and Toyota.

Subaru, Kia, Nissan, Chevrolet, and Mazda are considered to offer fair value in the current market.

New car inventory has grown from a low of 886,000 in October 2021 to around 2.8 million currently.

Increased inventory leads to higher incentives as manufacturers try to attract buyers.

The Federal Reserve's rate stance may lead to more APR incentives from manufacturers to help buyers afford monthly payments.

As of May 2024, 10 vehicles offer 0% financing, with others having rates as low as 0.9% and 1.9%.

2024 is shaping up to be a buyer's market for new cars despite high MSRPs due to the chip shortage.

Used car prices have dropped by about 5% in 2024, but they remain high with an average transaction price over $22,500.

The used car market is expected to see continued price drops, especially for EVs, which have experienced significant depreciation.

Negative equity is a significant issue, with customers facing an average of over $6,000, affecting their ability to purchase.

The used EV market presents a good opportunity for buyers due to rapid depreciation.

The average interest rate for a new car loan is a little above 9%, making it a challenging time for used car purchases, except for used EVs.

Transcripts

every quarter here at car Edge we give

you an auto market update my dad that

guy right there sold cars for 43 years

four years ago I roped him in to

starting car Edge we help folks buy cars

every single day we're going to talk

about the summer 2024 what's going to

happen in the new used new and used car

markets and then give you a little

update on where aprs are right now sound

good pops uh it does except I hate that

picture all right folks let's start with

the new car market we're going to give

you our rating in just a moment of how

good of a market it is to be a new car

Shopper Dad let's start with days supply

of inventory this is the most important

thing to understand if you're a consumer

in the market to buy a new or used car

the day supply means what it means the

longer the day supply the greater the

day supply the that means they have more

cars than they have customers and so you

should be able to get a better deal the

shorter day supply means they have more

customers than they have cars and it's

going to be difficult to work as good a

deal on those Brands yeah the day supply

is the number of days would take to sell

all available current inventory based on

the daily sales rate so the industry

average right now is 72 there's a 72

days supply for new cars in the United

States of America some brands have a lot

more days Supply and some brands have a

lot lower we'll dig into those in just a

moment but what's going to happen this

summer is we expect generally for days

supply of new vehicles to continue to go

up it has gone up significantly over the

past couple of months and definitely the

past couple of years yes now dad the

average listing price for new cars has

trended down just a touch the average

transaction price for a new car is $

47,2 140 back in April the most recent

data we have we expect to see you know

uh uh new car prices come down a little

bit that being said this day supply when

you kind of cross reference it with

price the day supply is highest amongst

most expensive vehicles and lowest you

know when um compared to uh most

affordable Vehicles that's not a good

situation for people who are looking for

like sub $40,000 Vehicles yeah the the

manufacturers have still committed most

of their production to the higher profit

margin higher uh equipped vehicles with

a higher

MSRP um and those that have lower msrps

uh to quote the old saying they're

selling like hot cakes ladies and Gent

gentlemen all right so then we have

those brands that have a lot of

inventory that would be Infiniti

Chrysler Volvo Ram Dodge Ford Lincoln

Buick Jeep Audi and Alpha Romeo these

are the brands that have the most overs

supplied inventory which means you can

go negotiate the best deal these are

brands that have also increased their

prices significantly msrps for these

vehicles have gone up significantly for

example RAM and and Chrysler Dodge and

Jeep stellantis their msrps have gone up

more than 50 % in the past 5 years that

is absurd the inflation rate is nowhere

near that so that's something to keep in

mind these are the vehicles that are the

most you know maybe negotiable have the

highest inventory but they're also

really expensive because the

manufacturer has jacked up that MSRP

even if you get a really good deal

you're still pretty much overpaying

because they raised the prices so much

over that time period expect for these

brands in particular in the summer

months to have really aggressive in

incentives so expect 5 10 15% off of

MSRP plus very aggressive APR incentives

we'll talk about loan interest rates in

a moment here but expect these Brands to

be the ones that are most aggressive

with their advertising and their

incentives the brands with the least

amount of inventory that would be Kia

Honda Subaru Lexus and Toyota these are

the brands that have not raised their

prices a dramatic amount Kia would be

the only exception here at Kia they

really have increased their msrps

significantly but for the most part

these affordable or more price

attainable options and they're in

significantly shorter Supply less

incentives on these vehicles during the

summer months but still opportunity

because they weren't jacked up like

crazy on the MSRP and truth be told

especially with Kia um I believe it's

five months in a row that they have

experienced sales declines so even

though they have a shorter day supply

they're probably more motivated to sell

some of the product they have uh because

sales have been down over the last five

months all right friendly reminder

there's enough inventory even for those

brands that we just described that have

low inventory to say no to Market

adjustments there are very few

exceptions to that rule maybe the most

rare specialty vehicles but say no to

Market adjustments on new cars we are

not during the chip shortage era you can

say no to Market adjustments the brands

that we think represent a fair value in

today's market Subaru Kia Nissan

Chevrolet and Mazda I know we're leaving

Toyota off this list but they are still

commanding a a pretty nice premium like

right around MSRP on most Vehicles

although you should and and you can

negotiate these brands that have enough

inventory and some vehicles at really

attractive price points that we think

they're fair value now and throughout

the summer most of these brands that are

listed here are brands that

have managed to maintain lower price

points than many of the other brands uh

they didn't get nearly as greedy as some

of the other brands and their dealers

seem to be more receptive to uh working

fairer deals for their customers than

many of the other brands out there

absolutely new car inventory is just a

macro for a moment here continue to grow

they had been as low as 886 th000 new

vehicles in inventory back in October

2021 we at around 2.8 million new

vehicles in inventory right now and our

expectation is that throughout the

summer we'll stay near 2.8 Mill million

maybe get up to 3 million so the market

is significantly more uh d uh more more

dense no more richly populated with

options which takes some of the power

away from the dealers to have all those

Market adjustments and things like that

this is also leading to increased

incentives so uh incentives as a

percentage of an average transaction

price that's the blue line on the chart

continue to go up as manufacturers have

to you know go into their checkbook and

find ways to uh increase interest in

their product they are offering more and

incentives and we expect to to continue

to see that happen in the summer months

uh do not be surprised if you see more

and more interest rate specials uh since

the FED has indicated uh that it could

be quite some time before we see any

rate reductions from the FED which means

the manufacturers are going to have to

offer specials to get people to be able

to afford the monthly payment some of

those specials will be APR incentives as

of the time we are filming this in May

10 vehicles have 0% financing right now

there are many others that have 0.9 and

1.9% financing financing options so

folks stay patient during the summer

months find those really attractive

offers and it's to your point to to make

sure that the monthly payment makes

sense to be uh to people and they can

actually afford to buy these vehicles it

is a good time to buy a new car 2024 I

think will go down in history as like

the buyers Market again msrps are

through the roof as a result of for some

Brands I should say through through the

roof as a result of the chip shortage

and and really jacking up prices but

there's inventory there's dealers making

deals there's incentives it's a good

time to be a new car buyer right now yes

it's not a great time but it is a much

improved time than what it had been for

the past two and a half three years so

if you find yourself in the

need for a new car you're you have much

greater buying power today than you did

even six months ago

all right let's talk about used cars Dad

let's give an update on the used car

market prices are down they're down

about 5% so far at the time of filming

this video on the retail side in 2024

but they're still really high the

average transaction price for a used car

is still north of

$225,000 and continues to be

unattainable for many people especially

when you factor in interest rates we are

on the other side of tax season the

summer months are typically slower in

the used car market than Springtime

Springtime is when tax returns Galore

and people are buying those new to them

used cars I would expect we would expect

to continue to see used car inventory

levels to be pretty tight there's about

a 44 45 days Supply because there were

what was it 12 15 million new cars not

produced during the chip shortage that

will impact used car supply but

generally speaking the used car Market's

like a little bit more stagnant it's

like going down a little bit but not

particularly fast and there's not this

huge influx of new new used car

inventory to to kind of you know

accelerate that downward Trend and in

particular the prices are coming down on

EVS so if you have an interest in an EV

uh now is a good time in the pre-owned

Market to purchase an EV because well

those values have dropped Like a Rock So

year-over-year wholesale Ed car prices

are down 14% And we expect to continue

to see those Trends into the summer

month and to your point that we have

actually seen the average retail asking

price for a used EV go from

$62,000 to around $30,000 $32,000 so

wholesale prices are down 14% for the

industry wholesale prices for EVS retail

asking Prices for used EVS are down

significantly more than that like like

like hard to wrap your head around how

much they have actually gone down that

being said a lot of people are faced

with negative equity we know yes and we

expect to continue to see customers that

might be interested in buying a new used

car going in to trade their vehicle they

will be upside down significantly on

their auto loan Edmond's latest data has

us at over $6,000 in negative equity

that's going to keep a lot of used car

buyers out of the market because they're

just going to be unable to get approved

for a loan and they're not going to be

able to roll over 6 7 10 15 $20,000 in

negative equity onto that next car loan

um it's an

unfortunate circumstance that uh

happened and occurred because of the

pandemic when there was such a shortage

people just overpaid for things and now

those who overpaid uh have some of the

highest negative equity numbers we have

ever seen on average in the industry so

the used car market in general is still

very difficult there's a shortage of

used quality used cars there's actually

an increase in repoed vehicles coming at

the dealer auctions so like that's good

in the sense that it's Supply but it's

kind of bad in the sense that the

quality is low so we know there are

quality issues it's a difficult Market

to buy a used car and maybe the caveat

here would be to your point earlier Dad

if you're in the market for a used

electric vehicle I guess it's a great

time because they have depreciated so

much so fast so like put an asterisk on

this one it's a difficult used car

market especially when you factor and

it's a 14% average interest rate on a

used car loan but to your point dad

pretty good time if you're buying a used

EV exactly if you're in the used EV

Market it's a good time if you're in an

any other type of vehicle it is a very

poor time all right folks well hopefully

you enjoyed this if you did please

subscribe to the channel check out the

website car edge.com and I wouldn't

leave you hanging the average interest

rate for a new car loan a little bit

above 9% so yeah the aprs out there are

wild thank you data as always appreciate

it