Hey, everyone. Welcome to another edition of the CDG Week-in-Review. Before we dive into this week's edition, a giant thank you to our CDG community. Your continued support makes this newsletter possible, and your feedback keeps us on point. If there's anything you'd like to see more of, hit reply and let me know.

—CDG

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Car Dealership Guy Week-in-Review

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. U.S. new vehicle sales decline in April

Big picture: New car sales were down 3.3% year-over-year in the month of April finishing below Cox Automotive’s original forecast. Compared to March, new car sales were down 9.1%. At this pace, analysts expect 15.7 million units to be sold this year, pretty much on par with 2023.

The key difference?

This year, April inventory was around 50% higher than last year's, meaning discounts and sales incentives were also much more generous last month. Even though the new car market is on track for another year of sales gains, it's still a far cry from the 2015 to 2019 average of 17.3 million units.

What’s making potential car buyers wait on their next car purchase?

1. Elevated car prices. The estimated average transaction price (ATP) rose to $48,510, the highest level since last December 2023.

2. Higher loan rates are also pushing up monthly payments despite manufacturer discounts. Average new car loan rates ended March at 7.2% and, in Q1, the number of consumers with $1,000+ monthly car payments stayed above the 17% mark for the fourth straight quarter.

Why it matters: Until inflation starts to cool off and the Fed decides to cut interest rates, new car sales will likely continue to be relatively flat. 

Of course, this isn’t the case for all brands. Honda, Toyota, and Subaru dealers are feeling the love with sales rising in April and inventories sitting comfortably below the national average. Stellantis or Nissan dealers, on the other hand, are struggling to boost sales and bring down their oversupply of cars. 

Now that we have a good idea of where the new car market stands, let’s zoom in on the used car market…

2. Wholesale used car prices dropped last month

Top line: Wholesale used car prices declined for the second straight month in April. When adjusted for seasonal trends, used car prices at auction dropped 14% from this time last year.

Why it matters: Used car prices are dropping faster than usual. 3-year-old cars depreciated by 1.6% in April compared to 1% between 2014 and 2019. But why?

Theory #1: Tax refund season is basically over, which led to more inventory remaining on dealer lots. Sometimes, dealers overbuy used inventory to prep for an influx of refund buyers. If that inventory doesn’t get sold, there will be less of a need to buy more cars at the auction level. 

Theory #2: The depreciation data is being skewed downwards by luxury EV price cuts. Preliminary numbers from Cox show a 17.5% year-over-year price decline for EVs. (prices of the Tesla Model Y have been reduced by 21% overall for example).

What our readers say:

Which leads me to the surge in used EV sales…

3. Carvana’s used EV sales are growing

Carvana’s used EV sales reached a new high of 4.3% in Q1 2024, up from 1.8% a year ago. With more EV options available, the average sales price of a new EV has dropped $6,000 from a year ago to $31,000 in Q1 of this year. 

Why it matters: This has helped narrow the gap between used EV prices and used gas-powered cars. Now, only $7,000 separates the two segments, compared to $13,000 a year ago.

Between the lines: While car buyers reap the benefits of lower prices, used EV owners are contending with faster depreciation rates, which I talked about earlier.

What’s driving the uptick?

Under the Inflation Reduction Act, certain used EV models qualify for an instant tax credit/rebate of up to $4,000. In Q1, 24% of Carvana’s EV and plug-in hybrid sales met the eligibility requirements for this credit. 

As one of my dealer friends put it – if a customer has subprime credit or doesn’t have any money for a down payment, they have option A, option B, or option EV… :-)

A word to the wise: What we’re seeing right now is a “sugar rush” in the used EV market–government subsidies are artificially inflating affordability and steep price cuts are creating the perfect conditions for a sales surge. 

Bottom line: Consumers and dealers need to ride this wave for as long as they can, because it’s not going to last forever.

I spoke about this exact topic with Brian Sullivan on CNBC’s Last Call this week. Here’s what I had to say:

Speaking of the Fed’s EV tax credits…

4. New eligibility rules for EV tax credits

At a glance: New EV tax credit updates from the Treasury dept. are intended to boost EV demand to meet the Biden Administration’s goal that 50% of all new vehicle sales be electric by 2030. 

But–critics say the new rule is a BIG win for China.

Tax credit breakdown: 

Right now, there are about 114 EVs for sale in the U.S. Only 22 models qualify for the tax credit under the Inflation Reduction Act (IRA). 13 models receive the total $7,500 rebate, and 9 receive $3,750. 

1. To qualify for the full $7,500 EV credit in 2024, the car must be assembled in North America. 

2. The MSRP can't be more than $55,000 for a sedan or $80,000 for an SUV or truck. 

3. Half of the battery's critical minerals must be sourced or processed in the U.S. or a country with a U.S. free trade agreement. 

4. On top of that, 60% of the battery components need to be manufactured or assembled in North America.

Bottom line: More EVs will likely qualify for the tax credit soon thanks to this new guidance. Up to $7,500 in free money for an EV is a pretty good deal for interested buyers, but the real test will be if this actually increases EV sales.

But EV tax credits are the only discounts car buyers can get right now…

5. Nissan has a new plan for dealers to move aging inventory

Nissan is hoping (and maybe even praying) to boost sales across the country by allowing dealers to advertise almost its entire line under invoice. This means dealers can sell 2024 Nissan models for less than they paid to the manufacturer to buy them. 

In other words…Nissan has ok’d dealers to sell aging inventory at a loss to invoice.

The reasons for this change are two-fold: Nissan dealers need to clear out aging inventory and the Japanese automaker also needs to make way for incoming 2025 models like the Nissan Kicks. 

For car buyers, now is a good time to grab a deal on a new Nissan, but dealers are less happy. Some believe that Nissan should take on more financial burden by offering corporate incentives. Instead, the onus is on the dealer to keep these cars profitable.

Key quote: "Nissan is saying, 'We can't afford to be in the market, so you need to be,'" one anonymous dealer told Automotive News. "The responsibility has been moved from the factory to us."

Between the lines: Dealerships aren’t required to sell their cars for under invoice—Nissan is simply giving dealers the leeway to advertise the steep discounts. 

But it’s controversial. 

These discounts can be great traffic drivers, but they don’t leave many options for dealers to profit once car buyers visit a dealership.

We’ve got tons of great jobs hitting the CDG Job Board right now. Here are some standouts for anyone looking for their next move.

• Sales more your game? S&P Global is looking for a Sales Executive-retail.

• Feel at home in the dealership? Tom Whiteside Chrysler Dodge Jeep Ram, near Columbus, OH, is hiring an FCA Technician.

• OPENLANE is looking for tons of new talent—they’re hiring market sales managers across the country. In Pensacola, Chicago, and Las Vegas to name a few.

Looking to hire? Add your roles today—it’s 100% free.

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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