Auto financing crunch, off-lease shortage, port strike ends

Hey, everyone. Trying a new experiment this week… We’re putting together a deep dive all about dealership service departments, and we want to hear from YOU. 

If you are a fixed-ops director or manager – share with us the ways you are future-proofing your service business. We might even give the best ones a shoutout :-)

Send your thoughts over to [email protected] and we’ll be in touch.

—CDG

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Each week, I curate the top 5 automotive industry headlines based on the topics CDG readers engaged with the most on social media. Let’s get started.

1. New car buyers are walking a financial tightrope

Car buyers are feeling the pinch. High interest rates, fewer low financing deals, and longer loan terms are making it harder to afford a new vehicle. 

By the numbers: Edmunds’ Q3 data shows the average new car APR sitting at 7.1% for the sixth quarter in a row, while 0% financing deals now make up just 3% of purchases.

To lower their monthly payments, buyers are increasingly opting for 84-month loans—now accounting for 18.1% of all new loans, up from 15.8% in Q1.

Why it matters: While these longer loans help with short-term costs, they come with a big risk—negative equity. And despite a recent interest rate cut, most analysts agree it’ll take more than a single adjustment to ease the pressure.

If this trend keeps up, new car sales could slump as lack of affordability continues to take its toll.

(Go deeper: 3 min. read)

As new car affordability declines, the used car market is facing limitations too…

2.  How long will the off-lease shortfall squeeze used car supply?

After dropping 6% in the first half of 2024, lease maturities are expected to fall another 19% by Q4, continuing a trend sparked by pandemic-era production slowdowns, according to Cox Auto.

What it means: Fewer lease returns mean fewer low-mileage used cars for dealers, keeping wholesale prices sticky and making it harder to find quality inventory. Some dealers are paying more at auctions or taking in less-than-ideal trade-ins, squeezing their margins even more.

The upside is new car inventories are bouncing back—up 40% from last year, helping ease new car prices and slightly impacting used car values.

Looking ahead: Leasing volumes increased to 25% in Q2 2024, indicating a potential future recovery in off-lease supply. But dealers will likely feel the pinch through early 2025, keeping used car supply tight and prices elevated for now. But the flooding from Hurricane Helene could mean an influx of units to the pre-owned market.

(Go deeper: 2 min. read)

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As consumers explore the used car market for affordability and practicality, one trend remains clear—many are still reluctant to embrace the plug-in hybrid option…

3. Automakers bet on plug-in hybrids—but consumers aren’t convinced: study

Automakers are investing heavily in plug-in hybrids (PHEVs) to bridge the gap between traditional vehicles and fully electric models, but consumers aren’t biting. 

Data dive: According to J.D. Power’s latest E-Vision Intelligence Report, PHEVs made up just 1.9% of total vehicle sales through August—lagging far behind BEVs (9.4%) and traditional hybrids (10.7%).

Why the gap? PHEV owners report lower satisfaction levels and higher-than-expected ownership costs due to maintaining two power sources.

And on top of that, many PHEVs don’t offer distinct design or performance benefits over their gas-powered counterparts, making it hard to justify the premium price tag.

Bottom line: Automakers are investing heavily in PHEVs, but the market response suggests they may need to rethink their approach.

(Go deeper: 1  min. read)

While automakers still figure out how to anticipate consumer demand, most did see the port strike coming. Luckily it didn't last too long…

4. Port workers back after brief but tense strike

Port workers on the East and Gulf Coasts are back at work after a short three-day strike that threw a wrench into vehicle shipments and other imports. 

Driving the news: The International Longshoreman’s Association (ILA) and the United States Maritime Alliance (USMX) reached a tentative deal late Thursday, putting an end to the disruption—for now.

The agreement bumps hourly wages by $4 every year for the next six years, adding up to a 62% increase by 2031. But it’s not a done deal yet—the contract still needs to be ratified in January, and issues like job security with automation are still on the table.

Why it matters: East and Gulf Coast ports handle 70% of U.S. auto parts imports, so a longer strike could have been a huge blow for the car industry. Fortunately, many automakers had already rerouted shipments and built up inventory, minimizing the immediate fallout.

For now, the car market avoided a major hit, but unresolved issues mean there could be more disruptions in the near future.

(Go deeper: 3 min. read)

5. Q3 auto sales: Winners and losers

Overall vehicle sales dipped in Q3 in the U.S., but a surge in demand for electrified vehicles (EVs, HEVs, and alternative fuels) kept most automakers steady.

Brand breakdown:

• Hyundai managed a 5% year-over-year sales increase for Q3 despite a rough September. While Kia and Genesis struggled with sales down 12% and 1.6%, respectively.
  

• Stellantis struggled the most, with U.S. sales plummeting 20%.
  

• Toyota saw its Q3 sales slip 8% due to recalls and stop-sales, but demand for hybrids and EVs remained strong.
  

• General Motors also had a slight 2% decline, but its EV sales jumped 46% from Q2.
  

• Honda stood out with an 8% boost in overall sales, driven by high demand for trucks and hybrids.
  

• Meanwhile, Tesla bounced back from its two-quarter slump with a 6.4% year-over-year increase, with hefty discounts and incentives playing a big role in pushing up sales.

As we head into the final stretch of 2024, the automakers that can push harder into the EV space—and balance affordability—are the ones poised to win.

That’s a wrap for now – make sure you’re following along on X, LinkedIn and IG for more real-time updates.

🚨 Hey you! Before you go…

Thanks for reading. Hit reply and let me know if you found this week-in-review valuable or have any feedback. I’ll see you next weekend.

—CDG

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