Big swing in leasing, Tesla takes profit hit, car market shifts

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—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. Why are old used cars getting so expensive?

Consumers are gravitating towards older used vehicles to save some cash. Yet, fresh data suggests it might be smarter to wait for prices to cool off.

Driving the news: According to iSeeCars, the share of cars on the market that are at least 10 years old has increased by 8% since 2020.

The kicker: Shopping for an older model might not be as budget-friendly as it used to be. Since 2020, the average price for a 10-year-old car has jumped by $3,059.

Why? The pandemic put a major hitch in vehicle production, causing a shortage of cars that are just one to three years old in the used market. Now, dealers and buyers are left grappling with a lot more older pre-pandemic models..

But, the average price point for used cars overall, is $25,251, similar to what was seen in the summer of 2021…

2. Used car market shows signs of (cautious) optimism

After a tough June with new car sales and inventory taking a hit due to software outages and power loss from severe weather, it looks like the used car market is also feeling the squeeze – but to a lesser degree. 

By the numbers: As of July 8, there were 2.08 million used vehicles on dealer lots across the U.S., including both franchised and independent dealerships, according to Cox Automotive. This is down around 170,000 units from June, but there's a silver lining – compared to last year, sales were actually up 1.41 million units, or 1.4%.

More good news: In June, the average listing price for a used vehicle settled at $25,251, a decrease from both May's price and a 7% drop against June 2023.

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Delayed reporting has muddied the waters on June's dealership disruptions, but new car forecasts signal a market rebound in July…

3. New car sales poised to regain momentum in July

J.D. Power is forecasting a 5% jump in new car sales against last year, with 1,135,300 cars expected to hit the roads.

Between the lines: June's software hiccup means some sales are rolling over into July, inflating the numbers a bit.

Yet, with more inventory, better manufacturer discounts, and improved lease deals, cars are becoming more affordable.

Quick stats:

• Annual sales pace (SAAR) to reach 16.7 million units, the highest in over three years.

• Average spending on incentives up $990 from last year.

• Consumers are poised to shell out nearly $47.8 billion on new cars in July, up $1.4 billion from last year.

July 2024 is shaping up to be a strong month for new vehicle sales, as consumers find more suitable deals.

Especially when it comes to leasing…

4. Vehicle leasing is having a moment

Lower monthly payments are the magic bullet for many consumers, and leasing is re-emerging as a key way to reduce payments and turn over inventory. Just check out this deal one of my X followers got:

By the numbers:

• Lease agreements made up 24.1% of new car purchases in Q1 2024 according to Experian.

• Ally Financial originated $639 million in EV and hybrid lease deals in Q2 2024 — way more than in years past.

• GM Financial lease originations for the quarter ending June 30 rose 8.2% from a year ago.

Lease deals are all over the place, and it makes sense why.

Zooming in: In June, the average monthly payment for a new vehicle exceeded $756, despite a jump in new vehicle inventory.

The culprit? Interest rates crunching consumer wallets and adding pressure to dealership floorplan expenses.

Bottom line: Leases might help clear out extra stock, but a flood of off-lease vehicles hitting the used car market could drop resale values in the next couple of years.

Interestingly, Tesla’s lease penetration actually dipped last quarter, and so did profits…

5. Tesla's net income slides 45% in Q2 despite a modest sales gain

For the second quarter in a row, Tesla reported a steep decline in profits — raising questions about the brand’s long-term strategy.

By the numbers: Tesla’s net income was $1.5 billion for the quarter, down 45% year-over-year — the second consecutive quarter of major declines in earnings.

The good: Tesla remains the top EV maker and maintains its market dominance despite fierce competition.

The bad: The EV market is hit hardest by price drops, with average EV prices down 18.3% year-over-year.

The ugly: CEO Elon Musk's support for Donald Trump could alienate potential buyers, Jessica Caldwell from Edmunds noted 👀

Listen up, BacklotCars is now OPENLANE—and they’re better than ever with vehicles of every age, condition and price point. Check em’ out at openlane.com. Back to our regularly scheduled content.

• Automaker product mix: Revamping SUV lineups and electrifying popular models.

• Stellantis considers shutting down unprofitable brands after first-half results.

• Insight from a dealer tech expert: How car buying is evolving.

• Ford Q2: $700 million warranty charge and possible EV partnership.

• 3 dealerships doing good for their communities in July

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

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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