I asked 100+ dealers how business is going...

Hey, everyone — The Ford Maverick has been killing it lately. For perspective, Ford has sold almost as many Mavericks in the first half of the year as it did for all of 2023.

Now, the automaker hopes adding all-wheel drive and more hybrid options to the 2025 version will keep drawing customers in. But let's be real, it's the under-$30K price tag (and Apple CarPlay… ha) that are sealing the deal for most buyers…

—CDG

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It's tough to gauge how the headlines are really hitting dealers and car buyers, so I went straight to the source. After getting a flood of responses, here's what I found out about what's driving the car market – straight from the lot.

The big picture: "Normalcy" might be the buzzword for 2024, but dealers say the market is far from it. A Missouri dealer called July their worst month in over a year. Another in the Midwest said their Stellantis (Dodge, Chrysler, Jeep, and Ram) brands "feels like the apocalypse."

Yet, there are bright spots. A Utah dealer hit a record month selling EVs exclusively, and a Northeast dealer bounced back strong from the CDK outages with solid July sales.

But overall, dealers are playing it cool. They're holding steady on sales and waiting to see what happens next.

Learning #1: Car buyers anxiously wait for lower payments

The Fed Reserve has hiked interest rates 11 times, shooting up from a low 0.08% to a 20-year high of 5.33%. This jump has pushed auto loan rates to an average of 7.3% for new cars and 11.5% for used ones.

When interest rates rise, so do financing costs and monthly payments. Experian says that the average monthly payment is $735 for new vehicles and $523 for used ones. For reference, in Q4 2019, the average new car payment was $554.

Reality check: The Fed has indicated that it might begin cutting rates as early as September, but consumers are unlikely to find relief after just a single cut.

The reason? Delinquencies (missed auto loan payments by 60+ days) are up. In June, below prime auto loan delinquencies (credit score: 300-660) soared 16% year-over-year and 53% compared to 2019. With loans getting riskier, lenders might not lower rates even if the Fed does.

Yet, rate cuts could open the door to a refinancing boom. Once rates drop by 100 or 200 basis points (likely after several cuts), competition among lenders will heat up and funding will likely come faster.

Learning #2: Inventory and prices are mismatched for some brands.

Some Ford dealers told me they have too much aging inventory, while a Chevrolet dealer said they could use more supply. That tracks on a national level, according to Cox Auto.

Ford had over the national average days supply with 101 days, while Chevrolet came in under the average at 69 days.

POV: Stellantis is one of the worst offenders, with some brands showing a days’ supply of 140+. I talked to a top 50 Stellantis dealer who called sales "a dumpster fire." He added, "Our heavy Stellantis load isn't helping. New car traffic is weighed down." Meanwhile, Stellantis is pulling back on incentives for their already high-priced vehicles. 

The affordability bridge: New car leasing incentives and EV tax credits are making cars more affordable. Here's the kicker: EVs used to be a risky bet for dealers and buyers. But now, with consumers craving lower payments, EV leases (and used EV sales under $25K + with the govt. tax credit) are hot.

Looking ahead: Hard to say that new car prices will drop meaningfully throughout the rest of the year. Instead, we’ll likely see even more leasing incentives on the horizon.

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Learning #3: Sales are stable but margins are down

Many dealers say their sales are holding steady but the same cars that were flying off the lots have become harder to sell.

One dealer in Phoenix said the same effort that got them 300+ in monthly sales 6 years ago is now netting them about 200+ sales.

By the numbers: New car sales are set to get a solid 5% boost this July year-over-year, according to J.D. Power. Not flat, but not a game-changer either.

Dealers are also grappling with margin compression. F&I gross profit per vehicle fell for 5 of the 6 top publicly traded auto dealership groups in Q1. While results vary by region and brand, these big players signal broader industry trends.

But the industry is increasingly adopting creative ways to counter shrinking margins through my favorite way: vertical integration. A great example of this is embedded auto insurance, where insurance is offered as part of the sales process. In this model, the dealer earns a portion of the profits, while consumers benefit from securing insurance at a fair market price through a quick and seamless digital experience.

Bottom line: As these trends unfold, one thing is clear: the temporary “high-profit, low-effort” days for dealerships are over. No one's begging dealers to sell them a car (unless it’s a new Toyota, Lexus, Range Rover at MSRP… you get the point). The industry is adapting to a new reality of increased competition and price sensitivity. Everyone wants lower interest rates, but until then... "standby to standby." Yet, there are glimmers of hope if you know where to look. The industry has moved beyond a “new normal.” Welcome to the era of “cautious optimism.”

Capital One Auto is the nation’s #1 originator of car loans. Its Q2 originations totaled $8.5 billion – up 18% year-over-year. Pretty insane. In this episode, I dive into current car market complexities with Sanjiv Yajnik, President of Financial Services at Capital One, and find out why dealers still have a lot to be optimistic about. Full episode here.

The future is now. Predicting which car a consumer will buy is becoming a reality for many dealers who are embracing the latest tech. In this episode, Chase Abbott, Vice President of Sales at Cox Automotive, discusses the future of dealership technology stacks, avoiding the #1 killer of car deals, and the secret playbook to getting a dealership's attention. Listen now.

Listen to the episodes here, and subscribe to the CDG Podcast on Apple, Spotify, or wherever else you get your podcasts. And thank you to Uber for Business, Cars Commerce, Auto Hauler Exchange, Private Auto, and CDK Global for making these episodes possible.

• Global hybrid production is booming.

• Lamborghini’s winning formula is defying an auto industry slump.

• Tesla Model Y ‘Juniper’ refresh sneak peak.

• How Chinese automakers can reshape a country’s market quickly.

• Toyota’s vehicle certification scandal has widened in Japan.

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.

• Braman Miami is seeking an experienced auto technician to work on Hyundai models alongside coveted luxury vehicles, including Bentley, BMW, Bugatti, Cadillac, Genesis, MINI, and Rolls-Royce.

• Ron Marhofer Auto Family is looking for a General Sales Manager to join its team in Ohio.

• Fullpath is hiring several specialists, administrators, and managers for remote positions and in-person roles in Chicago, Salt Lake City, and Burlington.

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

Thanks for reading. See you on the next edition…

—Car Dealership Guy

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