Car sales take a hit from CDK outages, rebound expected in July

The dealership impact of the CDK Global DMS hack in the latter half of June is starting to take shape. 

Setting the stage: After suffering a sophisticated ransomware attack that left nearly 15,000 stores critically disabled for roughly 2 weeks, dealers and OEMs had to adapt quickly to the sub-par conditions, including less aggressive pricing strategies according to Cox Automotive. 

By the numbers: Despite this, several new car affordability factors moved in favor of consumers:

• The (overall) estimated average auto loan rate fell by 13 basis points month-over-month in June to 9.83% – the lowest average rate so far in 2024.

• Year-over-year, income growth showed a 3.7% improvement helping to offset the increase (0.6%) in monthly payments to $756.

• The average number of weeks of income to purchase the average new car rose to 37.2 weeks, up from 37.1 weeks in May. But is still roughly 6 weeks fewer than a year and a half ago. 

What it means: While June's new car affordability was a bit of a mixed bag, the year-over-year trends show meaningful improvements. In June 2023, prices were 0.6% higher and both incomes and incentives were also lower, despite better interest rates. Average new car transaction prices (ATPs) continue an overall downward trajectory, declining $307 from a year ago. Yet, the average new car is still transacting for around $49,000, leading many consumers to explore the used car market. 

But, the ripple effects of the software outages have impacted reporting for that segment as well. Both franchised and independent stores sold 1.41 million used vehicles in June. This was a 7.6% drop from May, according to vAuto Live Market View data estimates.

The bright side? Accounting for the CDK Global outages, used car sales were still up 1.4% year over year.

Key quote: “While reporting was more disrupted than actual sales, we estimate a decline in used retail sales for June compared to May. However, much like a weather event, we believe any lost sales in June will be recovered in July,” said Scott Vanner, senior analyst of Economic and Industry Insights at Cox Automotive. 

Zooming out: According to an updated analysis from Anderson Economic Group (AEG), dealers have a lot of ground to cover to recoup lost sales in general. 

• The group estimates that dealerships lost 56,200 new car sales and more than $1 billion between June 19 and July 15. This includes both immediate losses from stalled new car sales and delayed service revenue. 

• However, AEG assumed most delayed service customers eventually came back. So, only permanently lost business counted towards the final billion-dollar hit, reports Automotive News.

Bottom line: CDK's outages undeniably pumped the brakes on new and used car sales, but analysts say it's a short detour. Dealerships are now in overdrive trying to make up for lost sales during the cyberattack. Stay tuned for further developments and the recovery trends that will likely reveal themselves at the end of July.

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