Customer psychology is about how people feel and decide when they’re buying a car. Even if the numbers look similar, people may react differently depending on how worried or confident they feel.
“Macroeconomic trends” are large-scale economic forces—like uncertainty, market volatility, and consumer sentiment—that influence auto demand. Dealers need to plan inventory and pricing based on these broader conditions, not just local competition.
Economic uncertainty means people aren’t sure what’s coming next financially. When that happens, buying a car can feel riskier, so shoppers may choose cheaper options or wait.
Consumer confidence measures how optimistic people feel about the economy and their personal finances. When it hits lows, shoppers are more likely to delay purchases, negotiate harder, or move to used vehicles to reduce risk.
Profit per unit means how much money a dealer makes on average for each car they sell. It helps show whether the business is truly doing well, not just selling more cars.
84 months means the loan is stretched out to about 7 years. That can make the monthly payment look smaller, but you usually pay more overall because you’re paying interest for longer.
“Mix factor” means the market is made up of different types of cars and different levels of features. If more of the cars are expensive ones, used prices tend to be higher.
If people are trading in pricier cars, dealers have fewer cheaper cars to sell. That can make it harder for shoppers to find deals under a certain budget.
They’re talking about how long the loan lasts—like 5 years (60 months) or 6 years (72 months). A longer loan can make the monthly payment smaller, but you often pay more overall.
Equity is the difference between a vehicle’s current value and what the owner still owes on the loan. If a buyer has no equity, it can make trade-ins and refinancing harder, especially if the car’s value drops faster than the loan balance.
“Consumer math” refers to how buyers mentally calculate affordability—typically monthly payment, down payment, interest rate, and loan term—rather than just the vehicle’s sticker price. Dealers and lenders often need to translate financing offers into simple, comparable numbers for shoppers.
Sticker shock just means people look at the price tag and feel shocked because it’s higher than they expected. In car shopping, it often happens when the monthly payment and total cost jump.
The Honda CR-V is a mainstream compact SUV known for practicality and strong resale value. Here it’s mentioned alongside the RAV4 as a used SUV option that was more affordable in the past.
“Used car profits” are the earnings dealers make on pre-owned vehicles after accounting for acquisition costs, reconditioning, financing arrangements, and overhead. The segment sets up a discussion about strategies dealers can use to improve profitability in the used-car market.
A “warranty” is the coverage that pays for certain repairs for a set time or mileage. In certified pre-owned strategies, warranties reduce buyer risk and can make a higher-priced used car feel more affordable and predictable.
Subaru is mentioned as one of the brands that treats certified used cars as an important part of its business. The implication is that having a real CPO program can attract more buyers.
Toyota is one of the brands mentioned as actively promoting certified used cars. That kind of marketing can make more shoppers consider CPO when they’re shopping for a used vehicle.
BMW is one of the brands mentioned in the context of certified pre-owned programs. The point is that BMW treats CPO as part of the overall customer experience, not just a generic used-car sale.
This means using numbers and information to make smarter choices. Instead of guessing, dealers use data to decide what cars to sell and how to price them.
This means more of the car-buying process happens online. Instead of doing everything in person, customers can research and start the process digitally, which can make buying faster.
Digitization means turning information into digital data that computers can use. For used cars, it helps everyone compare cars more easily and can lead to more accurate pricing.
Regional demand just means different places buy different things. A dealer uses local sales patterns to predict what cars will move faster in that region.
Inventory optimization is basically figuring out what cars to have, and how many, based on what local customers are likely to want. The goal is to have the right cars available without tying up too much money in the wrong ones.
A trade-in is when you bring your current car to the dealership and use it toward the next purchase. The dealer can use your trade-in details to figure out what you can afford.
LIVE
All consumers are going to have sticker shock.
One thing I'm going to say is super important is understanding that customer psychology, it's way different.
Now you're going to get almost every crediteer looking at used as an option.
A lot of research is saying that used vehicles for like higher creditors used to be kind of a fallback.
Now it's like a default.
It's everyone's dream to grow, to be a bigger dealer, to be a better dealer, or even get your first dealership.
Car buying is about the people.
Everybody wants to know what's a car business like and they like to see it under the hood.
Welcome to the Walkaround Podcast.
Welcome to the Walkaround Podcast.
I'm your host today, Heather Wilkinson, joined by Jonathan Banks.
Jonathan is the VP of product retailing for JD Power's retailing product portfolio.
So glad you're here, Jonathan.
Yeah, thanks for having me.
Oh, we really appreciate it.
Want to really just get into and hear from your perspective,
what are the big macroeconomic trends that dealers in the automotive industry should be thinking about?
2026 is going to look a bit like 2025 and a lot of that is around.
Economic uncertainty.
There is uncertainty indeed.
The last week or so, the S&P 500 has been down.
And you look at even where the stock market has been going in the few days,
there's a lot of volatility.
And meanwhile, consumer confidence, as you probably have heard from others,
is at one of the all-time lows.
So consumers are not feeling great and not really knowing what's going to happen in the future.
And meanwhile, they have been suffering from inflation that has been perpetuating even past COVID.
So affordability is a really, really big deal.
And it's even exacerbated even more in the auto industry because prices for autos.
It's happened to know this because I did look at it recently.
New vehicle prices on the retail side for a zero to eight-year-old pool have gone up around 45%.
Wholesale prices also up around 45%.
And meanwhile, in the wholesale market especially, you have a lot of volatility.
So when dealers are acquiring vehicles, they're facing high prices and volatility,
which is tough.
So consumers are stressed, dealers are stressed, and there's economic uncertainty.
But meanwhile, the market is doing great.
So when you look into it with fundamentals, it didn't seem like the market had a great year in 25
because we had really good months and some that were stressful.
But ultimately, when we got to the end, the used car market especially, this is my focus,
all the metrics were up for franchise dealers.
Total sales up, profit per unit up, retail price up.
Days to turn was actually up, which is negative, but still sitting below 50 days.
So really healthy market in this uncertain time.
Yeah, well, when you think about it from a used car perspective,
affordability is an impact, new cars and used cars.
I mean, average monthly car payment, I think is running around $800.
Almost $750, $800 for many, $1,000 payments.
Exactly, 84 months have become somewhat of the norm.
Much more years.
Yeah, than what we've seen.
When we're thinking about affordability and from a used car perspective,
what meaningful shifts could we see in how consumers are shopping for vehicles or deciding,
or even in summits, are they delaying purchasing of vehicles?
And what really should dealers be paying a close attention to right now?
So many things when it comes to affordability.
So first, there's the structural aspect.
And what I mean by that in the used market is the available inventory.
So you go back to 2019, half of the inventory on dealer lots were under 20 grand.
Under 20 grand is like kind of a sweet spot.
Yes, definitely.
Today, 33%.
So 33% on the dealer lots available to buy under 20 grand.
So we went from 50% to 33%.
And is part of that also tied to the fact that we have less vehicles coming off lease?
Maybe a little bit.
Most of it really has to do with the richer mix.
So the OEMs, so remember our supply and the use comes from years ago, right?
So we're getting fed from the low sales of 2020, 2021, 2022.
But remember what the manufacturers did during COVID years
is they started selling higher trim, richer mix, moved away from cars.
So you got the mix factor and you have the higher mix just from segment and mix from
trim level like contact.
Yes, vehicles that are being traded in are more expensive vehicles to begin with.
The younger vehicles being traded in are more expensive.
And to your point about lease maturities, they're going up,
but there's not as many as they are.
They're used to be historically.
So that's another interesting dynamic.
It's going to get better in 26, but so that's so that availability of inventory is one thing.
Now the psychology of buyers is changing too,
which one thing that people kind of thought was going to happen in 2025
is affordability was going to drive people out of the market.
I don't know where they would go.
But to your point about average age of how long people hold their vehicle,
went up a year from six and a half years to seven and a half years.
So people are keeping their vehicles longer.
People have traded equity, a lot of traded equity.
A new car, someone trading in a new car, they have about $7,200.
Can I just ask a question?
You're saying consumers have traded equity?
Okay.
So when I come in to buy a vehicle, if I have a vehicle,
there's a high likelihood that I will have equity in the vehicle that I own.
Really?
Because I'm thinking about those pandemic days
where you had consumers plant, that's what I'm like.
I'm thinking you're going to, they're more customers with negative.
Remember, I hold onto my vehicle average of six and a half years.
We're pre-COVID at that point.
I bought my vehicle for 44% lower than what the market is today.
Okay.
So I've been paying it off.
And remember, my interest rates were way lower too.
Oh, yes.
So, and I had a more traditional loan.
This is true.
Right?
60 month, maybe 72.
So I'm like, I'm rolling.
But 25% of buyers don't have any equity.
So there's like sort of a bifurcation in the buyer profile.
So this is kind of where I'm getting at, what do dealers need to do?
I'm calling it consumer math.
Okay.
Because some buyers come in.
Well, first, let me step back a little.
All consumers are going to have sticker shock.
Yes.
Okay.
So to your point, payments, I don't know if you're recording,
I don't know if I'm going off to the tent.
But new vehicle payments have gone up from about, I think,
550 pre-COVID to about, let's just say 750 now.
Yeah.
That's average.
Yeah.
So when you look at the, what I paid new in 19, I get a used car.
What I paid for a used SUV in 19, I get a compact car.
It doesn't work.
And a used compact car.
Yeah.
Now, so the affordable payment, like way back in that, you know, 19,
I could buy a used RAV4, CRV, whatever, and it was affordable.
Now, when I come in, I can get a Corolla or Civic,
which there's barely any anyway.
So finding one will be tough.
But my payment now is going to shock me on, wow, I can't get a new car anymore.
No, wow, I can't even get an SUV anymore.
So it's a crazy thing.
Yeah.
It's a real challenge.
And, you know, dealers have to be able to flex.
They have to be able to figure out to how to find those profitability
levers within their dealership for their operations.
So when we think about looking across the industry,
what are some of the most effective strategies that dealers could be using
to optimize used car profits?
Yeah.
So one thing I'm going to say is super important is understanding
that customer psychology.
It's way different.
So now you're going to get almost every creditor looking at used as an option.
So like a lot of research is saying that used vehicles for like higher credit
tiers used to be kind of a fallback.
Now it's like a default.
They look at it as...
Or they're looking at it for their child.
Yeah.
In that case, you're probably going to run it.
It's like becoming a lot more rational to consider a used as not like
it's a bad substitute.
It's just part of what I'm going to look at.
So because of that, I would argue that the way that you treat your used fires
is going to be totally different.
Because you're in all likelihood that sort of the pool of consumers
are going to be a mix of all kinds of different credit tiers.
And you're probably going to run into folks that normally would be always a new buyer.
They're at that high credit.
They probably have contributed.
They're probably going to look at used.
So what does that mean?
That means just make sure that your experience that you have in the new and used areas are the same.
And most dealers honestly are doing a fantastic job at this.
I mean, I've been working with dealers like using data and these experience.
And we've seen used operations become more and more important.
So it's already there.
But really, you really want to think about that.
And the other thing is back to the consumer math thing.
You are going to have consumers with seriously different situations.
And you're going to have to figure out how to work with them.
And one way that when I think about like different strategies is you don't want to
sell a person that needs an SUV, a car.
They're never going to come back to you.
If you put them in that and they're going to be bombed and the experience will be horrible.
So you have to figure out what do I do?
Some franchise, franchise dealers, for example, might need to reach down to older vehicles
that maybe they normally didn't play that old.
Maybe they always like their lease maturities, but there's not that many and they're still expensive.
So maybe they have to sell five or six, seven year old vehicles.
Good news is automakers have been making better and better and better cars.
So they last longer.
But then you have the idea of using certification to maybe like I'm buying a six year old car.
Maybe I certify it from one year to give them like that confidence
that they even buy an older model six years.
They still look pretty good, but you add that warranty and confidence.
So you almost have a good low price substitute.
And then you can maybe get that consumer in the car, in the vehicle that they really need.
Jonathan, I appreciate what you're saying about because of the affordability
and the average car prices, the average car payment being that 750 a month that
today looking at a used car, is it necessarily, oh, I got to look at a used car,
which I think then must have a positive impact on dealer certified pre-owned program.
And therefore it's no longer, oh, I can't get new, I've got to go use, but they're coming in
and maybe looking for that certified pre-owned vehicle to begin with.
Have you seen that on the data?
It's hard for me to say that they're actually, because I don't really know,
but what I do know is the manufacturers that have certified as a tool in their brand,
like Toyota, BMW, Honda, Subaru, they use certified as kind of their,
it's just part of their used operations, inherent.
Some manufacturers aren't doing as well.
I won't mention them, but they know who they are.
But it is pretty much across the board that these manufacturers that I would argue have
used vehicle operations strategy or using CPO, I think that has a pull.
And you actually, you have like Toyota and Honda actually have commercials
where they're promoting CPO.
And I'm ignoring the luxury brands, but also like Alexis and BMW, it's part of the experience.
So to me, yeah, there's probably that draw.
And there's another benefit though.
I mean, I could say that it's not just the value that you're giving to the customer.
You're also getting from a dealership standpoint, more loyalty and an OEM standpoint.
So loyalty increases from 33% to 50%, meaning if you buy non-certified used,
you have a one in three chance that consumer comes back to you.
You sell certified, it's one out of two.
So and days to turn is quicker.
So you're turning your inventory faster with certified.
Don't remember the numbers off the top of my head, but I think it's about a 14 day variance
certified versus non-certified.
So you got to do it.
And then to me, the other cool thing about it is it enables, I mean, you,
independents can use it too, because you have third parties that will create it.
But franchise dealers have a unique opportunity and OEMs have a unique opportunity to really
collaborate together where there's, to me, there's all, any time that you can create,
like remove friction between the OEMs and franchise dealers, they should.
It's always a good thing.
They should take it.
Yes.
And to me, this is a competitive advantage for franchise dealers because an OEM certification,
just, it just looks good.
It does.
You know, and so to me, when I see low certified penetration, I think change it now
because the market is perfect for it.
And that certified engagement from the dealer also directly impacts their service department
and operations.
You got it.
And it's all about get that certified customer with that certified, whether it's a 30 day,
69 day limited warranty in your service department.
So that they, they then in turn will be back to buy another.
You got it.
And then it all is that flywheel, right?
Because now you're getting them back.
You've generated all that money from service.
They know who you are.
You have a great customer.
And when they come back, hopefully things are going to be better for everyone.
You know, we'll, you know, they're back in your dealership and you have that high,
that higher propensity for them to come back with certified.
So it's all around great thing.
Jonathan, last question I have for you is looking ahead without, you know, having a crystal ball.
We've talked about, you know, the affordability, the inventory, the used car market and what
dealers need to be focused in on to help to continue to drive that profitability in the
used car department, which is so critical.
If you were advising a dealer principal who's listening to this on how to lead through the
next 12 to 18 months, their overall use car operations, what fundamentals would you anchor
to regardless of what the economy does?
I mean, everyone's going to talk about AI, right?
But to me, back to the idea of dealers really pivoted nicely about 15 years ago to really
utilize data to help make decisions.
That was great.
So that happened.
COVID, we shifted to digital aspects of the purchase.
So we streamlined the experience process and the used car also was able to benefit from that
because you're able to now understand the data of the whole market from all the digitization,
everything's like online, things are described better.
So foundationally, we've created really good data and processes.
So now moving forward, now we can move to more like technology advances.
Chatbots are cool and everything, but the analytics and the agents, adding that to your
acquisition strategy, so understanding your data, using agents within some of your tools to
basically say, hey, there's a three-year-old full-size pickup available in the auction.
I would instantaneously be able to understand what I would be able to sell that vehicle for,
an estimate on how quickly I can turn that vehicle, how many I need, and whatever.
So if you think about that in a grander scale, you can now really understand from,
if you're a dealer group and you have multiple locations, you can create inventory optimization
based on regional demand. You can even get down to configurations like packages and individual
pieces of content that do better without really doing anything more except letting AI and advanced
analytics do the work for you. So you're not really like taxing yourself more.
You're just using the insights you're getting from data analytics and AI to augment your already
good operations. So to me, we're just ready to capitalize on these kind of tools.
So I'm hearing data, AI agents for inventory optimization to know what you have in your
inventory or what you have access to, key ingredients as we look to move forward in the
next 12 to 18 months for dealers in their used cars, which will in turn, being able to, I guess,
access that vehicle easier and know what you have available for that customer when they come
into the dealership or when they're contacting through your website or your lead gen, wherever
they're coming from. Yeah, and that's a good point too, utilizing AI upstream too, to make sure that
you enter back to the consumer math. If I know what that consumer situation is from a budget
standpoint, a trade-in standpoint, I could feed them the right vehicles to consider when they
come into the dealership too and make sure that you're offering the right vehicle that aligns
with what they can afford and what they need. So that's another great advantage upstream
of AI just making that seamless experience of buying the vehicle and getting the right vehicle
to the right consumer at the right price, et cetera. It starts from the top.
It does. Well, Jonathan, thank you so much for the insight that you provided us today. It's so
critically important that we recognize the importance of the used car operation in the
dealership and then that downstream impact with service. The end of the day, used car and service
in many instances, that is the anchor of the dealership. So making sure you have the right
strategies in place are so important. So thank you so much. We really appreciate you being here.
We really appreciate you joining us today on The Walkaround and we hope you enjoyed the episode.
Please be sure to like, share, subscribe, and follow us. We look forward to seeing you next time
on The Walkaround.
About this episode
JD Power’s Jonathan Banks breaks down why affordability is driving “sticker shock” while the used market still looks strong for franchise dealers. He cites rising new/used prices, higher monthly payments, and tighter low-price inventory (fewer sub-$20k units due to richer trade-in mix and fewer lease turnoffs). Buyer behavior is shifting: people keep cars longer, many have equity, but there’s a split between equity-rich and no-equity shoppers. Banks argues dealers should tailor “consumer math,” lean into consistent new/used experiences, and boost certified pre-owned to create loyalty and faster turns—then use data and AI for inventory optimization and better upstream matching.
Jonathan Banks, VP of Product Retailing for JD Power’s Retailing Portfolio, breaks down macro trends across the industry, used-car profit strategies, and how dealer principals can optimize performance in the next 12–18 months.
Episode Breakdown
00:00 - Meet Jonathan Banks
01:00 - Macroeconomic trends dealers should be thinking about
03:30 - Affordability: What should dealers be paying attention to
08:09 - Strategies dealers should be using to optimize used car profits
10:49 - Thoughts on dealer certified OEMs
14:37 - Advice to dealer principals on how to optimize their stores
16:47 - Key takeaways for dealers in the next 12 to 18 months
For more information about our guest, visit their LinkedIn.
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