Headline data showing a 15 percent drop in November U.S. vehicle sales seem startling, but industry experts say it doesn’t accurately reflect the industry’s true state.
That’s because when adjusted for three fewer selling days and one less weekend, there was almost no decline at all — meaning an economically crucial rebound in U.S. car sales is still intact.
“November 2020 is a prime example of why accounting for selling day differences is important in measuring comparable sales performance,” Thomas King, president of the data and analytics division at J.D. Power, said in a research note that calculated the true decline at only 3.5 percent. King also pointed out that the November dip came on the heels of year-on-year gains, further underscoring the narrative that the auto industry is not losing steam.
Meanwhile, Kelley Blue Book noted that the average price of a new vehicle was up 1.3 percent, or about $500 from a year ago, to $39,259. On an individual manufacturer basis, Kelley said Ford had the highest average selling price — $46,936 — while a 6 percent increase in average prices at Fiat Chrysler took the top spot by that measure.
The range of prices for different types of vehicles was also telling, as Kelley reported the average price of vans rose 9.6 percent to $40,719, followed by a 7 percent increase in full-size pickups to $54,854. The average price of a subcompact car, the cheapest vehicle segment was up 1 percent to $18,733, Kelley data showed.
On the flipside, electric vehicle prices fell 8 percent to $43,703, while high-performance car prices fell 30 percent to about $82,001 from more than $118,00 last November, Kelley said.
Paying for It
According to the credit bureau’s analysis, 30-day and 60-day delinquencies are currently at 1.56 percent and 0.51 percent, respectively, versus 2.25 percent and 0.75 percent one year ago.
“While the decline in 30- and 60-day delinquency rates is a positive trend for the industry, particularly with some of the accommodation programs coming to an end, we do need to consider the impact these programs have had on consumers,” said Melinda Zabritski, Experian’s senior director of automotive financial solution.
“Some consumers likely leveraged financial assistance programs to manage through hardship, so it’s important for lenders to keep a close eye on how delinquency rates evolve over the coming quarters,” she said. “Nonetheless, the improvement is a positive sign for the country’s economic recovery.”
The report also noted that top-rated buyers shifted back to purchasing more used cars after automakers scaled back the new-car incentives they’d been offering in the pandemic’s early months. Prime and super prime borrowers made up 55.3 percent of used vehicles financed during the quarter, a new high for used vehicle lending, Experian said.
In addition, an increase in cash buyers saw the percentage of new vehicles being financed decline in the third quarter to 82.4 percent from 87 percent in Q3 2019.
And although the overall price of new and used vehicles is up, lower interest rates and longer average repayment terms of just about 70 months have helped keep monthly payments a bit more manageable.
“As the market evolves and financial situations shift, it’s important for lenders and dealers to stay close to the trends and make strategic decisions that help keep the industry moving forward and consumers in their vehicles,” Zabritski said.
Love to Drive
And although the pandemic has caused massive lifestyle shifts and workforce changes with unprecedented numbers of people no longer going into an office, a new survey from Ally Insurance shows Americans still love to get out on the open road and drive.
Although about half of motorists reported that they are currently driving less, 72 percent said they drove alone to “clear their heads.”
And gig workers — who typically do lots of small, odd jobs locally, are actually using their vehicles more these days. The study found they’re driving 26 percent more than they used to.
Surge in Online Sales and Financing
Like many industries, the pandemic has also seen a surge in online transactions for both purchasing cars as well as doing the paperwork and securing a loan needed to buy one. For instance, Mercedes Benz has said it expects 25 percent of its passenger car sales to be made online by 2025.
CEO Paul Hennessy of online car buying platform Vroom told PYMNTS in August he welcomes the surge in online sales, but said there’s more to it than just clicking a link.
“It’s going to be a real challenge for traditional dealerships that run brick-and-mortar sites very well to suddenly become eCommerce companies,” Hennessy said. “And I would suggest that there’s a big difference between having a website and being an eCommerce company and between delivering a car in your neighborhood and having a nationwide logistics network.”
The digital shift is also spilling over into loan processing and has made servicing and collecting loans easier. Still, industry watchers have been worried that the expiration of pandemic-era loan deferments will soon start to expire, potentially causing default rates to soar.
Satyan Merchant, senior vice president and automotive business leader at TransUnion, said in a press release last month that “while the overall percentage of auto accounts leveraging financial accommodation programs has been declining, there were approximately 3.8 million auto accounts in some form of accommodation at the end of September.”