Consumers shopping for a new or used car for the holidays are finding a slightly improved selection on dealers’ lots, but bargains have been hard to come by.
To help stretch car payment dollars, more dealers are offering 0 percent financing. Jonathan Smoke, chief economist at Cox Automotive, says an increasing number of consumers took advantage of interest-free financing last week.
“The share of financing at 0 percent rose to 13.4 percent from 6.7 percent at the beginning of November,” Smoke said.
One of the problems consumers have faced is having fewer cars to choose from. Even though inventories ticked up last week, the new car inventory level at the beginning of December is down 20 percent year-over-year.
The total U.S. supply of available unsold new vehicles stood at 2.87 million as December began. That’s up from 2.67 million at the start of November, but it’s well below last year’s 3.56 million vehicles. Last week, there was a 74-day supply of new vehicles on dealers’ lots, which was an improvement. For used cars, supplies are even tighter.
“Retail used supply declined to 47 days in the latest data, which is normal given the pace of sales,” Smoke said. "Wholesale supply was down to 25 days.”
The COVID-19 factor
The dangerous rise in coronavirus (COVID-19) cases dampened consumer sentiment last month, and even though the number of cases is steadily rising, Smoke says people are still purchasing new and used vehicles, just not at the pace they did before the pandemic.
“Our estimated retail sales, using a same-store methodology, shows momentum improved for both new and used sales last week,” he said. “Sales for the seven days ending Saturday were down 22 percent year-over-year for used and down 14 percent for new. December has started better than November ended.”
Smoke says it may be all about timing. He says many serious buyers may be acting before they think conditions could get worse.
With inventories tight, buyers are finding fewer incentives -- beyond 0 percent financing -- at new car dealers. Used car prices have run up since the start of the pandemic, but they dipped slightly last week.
Cox Automotive reports that model year 2017 wholesale prices declined 0.3 percent last week, and retail prices declined by 0.5 percent. However, both are now up 6.5 percent from the beginning of the year.