Auto Market Weekly Summary

Inflation changed little in November but was consistent with expectations. Headline inflation declined with the second-lowest reading since March 2021. Only June was lower.

Retail sales declined in November but were stronger than expected, with consumer spending having the strongest year-over-year performance since February.

Access to auto credit declined in November as credit tightened across all channels and with most lender types. Auto loan performance saw mixed trends in November, as delinquencies increased, but defaults declined.

Inflation Declined to the Second-Lowest Level Since March 2021

Headline inflation ticked up slightly in November, but year-over-year inflation moved down to the lowest level since June and the second-lowest level since March 2021.

The headline aggregate measure increased 0.1% in November on a seasonally adjusted basis and was up from no change in October. The core Consumer Price Index (CPI), excluding Food and Energy, increased 0.3%, up from a 0.2% gain in October.

Housing saw an accelerating increase to 0.5% from 0.4%. Transportation experienced a 0.9% decrease, driven by a 5.9% decrease in fuel, but used cars, maintenance, and insurance saw price increases. New cars saw a modest price decline. We observed used car prices declining and new car prices increasing in November in actual transaction data.

On a year-over-year basis, core CPI remained at 4.0%, the lowest since April 2021. The overall CPI declined to 3.1%, its second-lowest reading since March 2021. Only June was lower at 3.0%.

Retail Sales Were Stronger Than Expected

The initial retail sales report for November showed stronger-than-expected consumer spending. The 0.3% increase was better than the 0.1% decline expected, but the October decline was downwardly revised to 0.2% from the 0.1% first reported.

The auto sector outperformed the rest of the retail market as sales excluding motor vehicles and parts increased by 0.2%, while sales of motor vehicles and parts increased by 0.5%.

Category level performance was mixed. Restaurants and bars (1.6%) and sporting goods, hobby, book, and music stores (1.3%) had the largest gains. Gas stations (-2.9%) and miscellaneous stores (-2%) had the largest monthly declines.

Retail sales were up 4.1% year-to-year on a nominal basis, up from 2.2% in October and the strongest year-over-year performance since February. Compared to last year, only two major categories of 12 were down, with gas stations (-9.4%) and building material and garden equipment stores (-2.5%) down the most. Motor vehicles and parts were up 6.1% from a year ago, while restaurants (+11.3%) was the category up the most. Adjusted for inflation using the CPI, retail sales increased 0.2% for the month and were up 0.9% from a year ago.

Auto Credit Tightened in November

Access to auto credit declined in November as credit tightened across all channels and with most lender types, according to the Dealertrack Credit Availability Index.

Reversing modest improvements in the Dealertrack Auto Credit Total Loan Index that had occurred this summer and fall, the index declined 0.8% in November to the lowest level in three months. Credit access was tighter than a year ago in all channels and in most lender types. Compared to February 2020, credit access was tighter in all channels except for used sales through independent dealers and auto loans from finance companies.

Movement in credit availability factors mostly moved against consumers in November. Yield spreads widened, the subprime share declined, term length declined, the negative equity share declined, and down payments increased, and those moves reduced credit access for consumers. The only factor that did not worsen was the approval rate, which was steady at the lowest point for the year and the lowest level since 2020.

By channel, new loans from non-captives saw the most tightening, while new loans in total saw the least tightening. On a year-over-year basis, all channels were tighter, with certified pre-owned (CPO) loans having seen the most tightening. Captives saw slight loosening, but all other lender types tightened, with banks tightening the most. Credit unions were the tightest compared with a year ago.

Auto Loan Delinquencies Increased, but Defaults Declined

Auto loan performance saw mixed trends in November, as delinquencies increased, but defaults declined. Delinquencies of 60 days or more increased for the seventh month in a row and were up 10.9% from a year ago.

In November, 1.92% of auto loans were severely delinquent. That was up from 1.89% in October, the highest rate dating back to at least 2006. 7.53% of subprime loans were severely delinquent. That was up from 7.38% in October and was also the highest rate for any month dating back to at least 2006. The subprime severe delinquency rate was 77 basis points (BPs) higher year-over-year, while the aggregate was 17 BPs higher.

The delinquency rate has been high all year but has not been leading to a similarly high level of defaults, and defaults declined in November. Defaults of auto loans fell by 7.7% in total in November from October and were down 4.3% from last year. Defaults of subprime auto loans declined by 10.8% and were down 14.7% year-over-year. The default rate in 2019 was 2.90%. The default rate year-to-date through November is 2.70%.

Jonathan Smoke

Chief Economist

Jonathan Smoke leads Cox Automotive’s economic and industry insights team, which tracks key metrics and trends impacting both the wholesale and retail markets for vehicles informed by the proprietary data from the company’s businesses and platforms. For 28 years, Smoke has focused on translating data and trends into relevant actionable insights for the industries that represent the biggest purchases that consumers make in their lifetimes: real estate and automotive. Smoke joined Cox Automotive in 2017.