Jan 12, 2024 - Business

Car buyers are getting some leverage back as inventory jumps back up

Data: U.S. Census Bureau; Chart: Axios Visuals
Data: U.S. Census Bureau; Chart: Axios Visuals

Rising auto inventories are shifting the balance of power in the car market.

Why it matters: It could mark a reversal of the COVID-era changes to the auto industry, which dramatically lowered production and retail inventories, while boosting carmaker and dealer profits.

State of play: Inventories on dealer lots — both new and used — are climbing toward pre-COVID levels, analysts say, which is starting to put downward pressure on prices.

What they're saying: "We officially bid farewell to the seller's market that has defined the last four years," said Jonathan Smoke, an auto industry analyst, on a call this week laying out market research group Cox Automotive's views on the coming year.

  • (Cox Automotive is part of Cox Enterprises, which also owns Axios.)

Zoom in: Carmakers are starting to increase incentives — such as discounts to sticker prices or lower interest rates provided by captive lending arms — to boost sales.

  • Before the pandemic, dealers were typically offering incentives worth roughly 10% of the purchase price to would-be buyers.
  • Such sweeteners fell to 2% during the acute phase of supply disruptions in 2021 and 2022 that saw auto inventories collapse, according to Cox.
  • Now they're coming back up: Discounts have risen to nearly 6% of selling prices.

Yes, but: As is often the case in the post-pandemic world, consumers might not feel like they're getting a huge deal any time soon. After all, automotive prices have soared in the last few years.

  • New vehicle prices are up 20% on average from late 2019. And used vehicle prices are up more than 35%.

The bottom line: Still, on the whole, it looks like 2024 could be the moment for car buyers to press their advantage when shopping for fresh wheels.

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