Trends, Topics & Opportunities
Automotive Financial Headwinds
PART 1 – NEW VEHICLE AFFORDABILITY
High interest rates, inflated vehicle prices, and reposessions... oh my!
High prices and higher interest rates have dampened demand for new vehicles; now add impact from what appears to be the start of a CREDIT CRUNCH and we have what could be a PERFECT STORM for new vehicle sales, impacting both the used vehicle market and automotive service for years to come.
Topic #1: New Cars Have Become Unaffordable for the Masses
The monthly payment for a new vehicle has reached historic highs, relative to percentage of household budget. With fewer entry-price point vehicles being manufactured, a NEW vehicle now appears beyond reach for millions of consumers.
Average New Vehicle Monthly Loan Payments
$578
per Month
2020
$646
per Month
2021
$716
per Month
2022
Source: Experian State of Automotive Finance Market, Q4 2022
OUR TAKE:
While dealerships were able to trade volume for higher margins in recent years, the impact from a credit crunch, inflated prices, and a declining economy will not create enough demand to maintain prior performance. Dealers will need to, once again, focus on taking marketshare as availability of qualified leads decline.
We would like to hear your take.
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