Look for Good Deals on Cars and Trucks
July 18, 2024
Look for Good Deals on Cars and Trucks
Auto and light truck assemblies sprinted 21.1% month-to-month (not annualized) in June to a seasonally-adjust annualized level of 13.1 million units, the highest level of monthly of production since July 2015. In May, retail dollar inventories of motor vehicles (and parts) relative to dollar retail sales of them continued their upward trend, reaching 1.93, the highest since April 2020, when Covid infections were in their early stage. The retail inventory-to-sales ratio of motor vehicles will artificially rise higher in June due to the surge in June assemblies and the curtailment of sales related to the computer hacking of car/truck dealers last month. But discounting the likely increase in the I/S ratio in June because of the hacked software, retail inventories of motor vehicles are starting to look a bit excessive, albeit below the ratio to sales pre-Covid. (See Chart 1 for these data.)
Chart 1
At the same time that retail motor vehicles are rising relative to sales, problems are developing in the financing of cars and trucks. According to the New York Fed’s quarterly survey of household debt and credit, new delinquent motor vehicle loans relative to outstanding balances, which have trending up since 2022, hit 7.94% in Q1:2024, the highest since Q4:2010 (see Chart 2). Moreover, according to Cox Automotive, repossessions of cars and trucks are up 23% in the first half of 2024 compared to a year ago and up 14% since the first half of 2019, which was pre-Covid.
? Chart 2
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Just as the inventories of new single-family houses are becoming excessive, so, too, are those of new cars and trucks, and perhaps inventories of used cars and trucks due to the increase in repossessions. Thus, look for some good deals on new and used cars and trucks in the coming months.
Paul L. Kasriel
Founder, Econtrarian, LLC
“For most of human history, it made good adaptive sense to be fearful and emphasize the negative; any mistake could be fatal”, Joost Swarte
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