The Car Market Has Reached a Tipping Point | Episode 974
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25:12
Car
Saturn Outlook
The Saturn Outlook is a big family SUV that was made a while ago, from 2007 to 2010. It's talked about because it's no longer made, and people often look at older models to see how they hold up.
Car
Volkswagen Id4S
The Volkswagen ID.4 is a fully electric SUV made by Volkswagen. It has a roomy interior and uses electricity instead of gasoline, making it more environmentally friendly.
Car
Dodge Charger
The Dodge Charger is a large car that is popular for its powerful engines and sporty design. It's often seen as a classic American muscle car.
Car
Subaru Solterra
The Subaru Solterra is Subaru's first electric SUV. It has all-wheel drive, making it good for outdoor adventures and rough weather.
Car
Jeep Wagoneer
The Grand Wagoneer is a large, luxurious SUV from Jeep. It's designed for comfort and can handle off-road driving, making it versatile for different terrains.
Company
Cox Automotive
Cox Automotive is a company that provides services and information to car businesses. They help companies understand the car market better with their reports and data.
Car
Toyota Camry
Car
Toyota Rav4
Car
Toyota Tacoma
The Toyota Tacoma is a pickup truck that is known for being tough and good for off-road driving.
Concept
manufacturer incentives
Manufacturer incentives are ways that car companies help lower the price of their cars. They might offer cash back or lower interest rates to make it easier for people to buy a car.
Concept
dealer discounts
Dealer discounts are price cuts that car dealerships give to help sell cars. They can lower the price you pay when buying a car.
Term
440% financing offers
A 440% financing offer sounds like a very high interest rate for a car loan. It's important to understand what interest rates mean when borrowing money to buy a car.
Concept
manufacturer to dealer incentives
These are bonuses or discounts that car makers give to dealerships to help them sell more cars. It makes it easier for dealers to sell cars and clear out their stock.
Term
payment calculation
Payment calculation is figuring out how much money you will pay each month for a car loan.
Company
CarEdge
CarEdge is a website that helps people figure out car payments and how much cars are worth.
Car
Genesis
Genesis is a brand of luxury cars that comes from Hyundai, similar to how Lexus is to Toyota.
Term
average car price
The average car price is how much most cars cost, which is usually around $50,000 right now.
Car
Genesis GV70
The Genesis GV70 is a fancy SUV that looks nice and has a lot of cool features. It's important because it competes with other high-end SUVs and is talked about for its price and what you get for that money.
Concept
higher profit margin
Higher profit margin means that a car costs a lot less to make than what it sells for. Car companies like to sell cars that make them more money.
Term
$3 million new cars
$3 million new cars are extremely expensive cars that are usually very luxurious or special. They are not the kind of cars most people buy.
Car
Toyota Sienna XLE
The Toyota Sienna XLE is a version of the Sienna minivan that has extra features for comfort and convenience. The 2024 model is designed for families and includes modern technology to keep everyone safe and entertained.
Term
retired service loaners
Retired service loaners are cars that dealerships let customers use when their own cars are being fixed. They usually have low mileage and are in good shape.
Car
Acura TL
The Acura TL is a luxury car that is comfortable and has a nice interior. It's a popular choice for people who want a good-looking and reliable sedan.
Car
Acura MDX
The Acura MDX is a luxury SUV that has a lot of space and is great for families. It comes with many features to keep you safe and comfortable while driving.
Term
certified service loaners
Certified service loaners are cars that dealerships let customers use while their own cars are being fixed. These cars are usually in good shape and can be sold later as used cars.
Company
AutoTrader
AutoTrader is a website where you can buy and sell cars, making it easier to find what you're looking for.
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It's noon here in Venter City, New Jersey,
and this is Car Edge Live for Wednesday, December 3rd
with your host, both here in Venter, me, Ray,
and, well, my good-looking son, Zach.
How are you?
I know how you want, but how are you today, handsome?
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I'm doing fantastic.
Happy day.
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And when you're hard of hearing, even with hearing aids,
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And, Dad, yesterday you talked about auto insurance
a bunch.
CarEdge.com, click on insurance.
Shop and compare on insurance, folks.
Please do it.
We've seen so many people save money
just since yesterday's video
because they're shopping and comparing on auto insurance.
That being said, Dad, the car market today,
it has officially reached a tipping point.
If you've been following our show for a while now,
you know that new car sales are down year over year
for the month of November.
And used car prices are starting to depreciate
rapidly at the wholesale dealer auctions.
There's some concern happening there.
We've got economic uncertainty
when it comes to loan delinquencies
and things like that.
Well, Dad, today it manifested itself
in the Q4 2025 Cox Automotive Dealer Sentiment Index.
Every quarter, Cox Automotive,
which is the big conglomerate in the auto industry,
none of us really think about Cox Automotive as shoppers.
But they have this huge, I don't want to call it a monopoly,
but they own a lot of the assets in the auto industry
and they're the big, big, big player every quarter, Dad.
They do this survey and they ask questions
to dealers to get their sentiment.
Today's responses, look at this, Dad.
We've got the question.
How would you describe the current market
for vehicles in the areas where you operate?
Overall, Dad, we're down to the lowest rating
we have seen since Q2 of 2020, the trend line.
This is dealers saying how like they are
to be successful.
It is going down and significantly
over the past couple of quarters.
This is the tipping point here.
Another example of the tipping point in the auto industry.
What do you make of this?
Well, I guess I would make of it if I was a dealer
that I am concerned about the affordability
of the products that I'm selling
and whether or not I have a big enough market
to sell it into.
And so that's going to impact
how I see my business going in the future.
The one thing I've learned in six years
of doing this with you
is when we look at graphs like that,
it always seems to be important for it to go up
and to the right, not down and to the right.
And so if dealers are finally saying,
I don't know, this is becoming an issue.
And I don't think this bodes well for my business.
Then, well, I'd have to believe that it's an issue.
To be clear, we are talking heads here
on the internet, right?
We're always focused on our customers,
which are you, the shoppers, the viewers.
This is the other side.
This is not us saying it.
We're just reading the data off the screen
and it's coming from the industry.
If anything, dad, the industry wants to sell a story
that the car market's going to grow.
Everything's rosy.
Customers are buying and more and more profitable.
You know what we're seeing instead?
Quote, dealers are signaling caution as 2025 ends.
Said Mark Strand, deputy chief economist
at Cox Automotive Persistent.
Direct quote, persistent economic uncertainty
and fading consumer confidence are weighing on sentiment
compared to the rest of the year.
The current market feels like it's running out of gas.
As we look ahead at 2026,
renewed market momentum is entirely possible,
especially if we get material interest rate relief
and a rebound in consumer confidence.
That's the rose-colored glasses.
Yeah.
Especially if we get material interest rate relief.
We've been banking on interest rates
coming down for a long time now.
Even if the Fed lowers the rates again this month,
we have not seen a significant decline
in the average new car or used car monthly payment.
And we have not seen a decline in the loan terms
that people are taking,
whether it be for new car or used car.
So I think to base a somewhat of an expected turnaround
on significant lowering of interest rates,
what do you think is going to go back to 2009, 2010,
when it was down the next to nothing?
It's a big, bold bet to make and one that,
quite frankly, we don't see going in the next year
that interest rates are going to plummet in any material way.
That being said, we did compile the data.
We're up to 440% financing offers here
for the month of December.
So that number is continuing to grow.
That's great.
No, that really is.
But my point was going to be they missed the biggest point
of that affordability issue
that these dealers are basically talking about.
Car phrases.
Let me share more data with you.
Let's keep going here, Dad.
Key findings from their dealer sentiment index.
Ready?
Number one, market sentiment dropped sharply.
This is what we started the show off.
The current market index fell to 38 from 43 in Q3
and future outlook declined to 42 from 46,
both well below the positive threshold
of 50.
Franchise dealers reported a current market index
of 47 notably higher than independence that are at 35,
but both groups saw declines
and remain below the positive threshold
reflecting widespread caution.
Customer traffic hits record lows.
Overall traffic dropped to 31
with in-person traffic at 29 and digital at 40.
The decline in customer traffic was especially pronounced
for franchise dealers with in-person and digital traffic
both reaching all-time lows
while independent dealers also saw a week
but less severe declines.
May I say something about that?
Yeah, please.
If you are seeing a decline in traffic
and if you are like most dealerships
and the smallest decline is in digital traffic,
then why don't you treat digital traffic like real traffic?
Why don't you provide your customers
with the information that they're asking?
Yeah, for sure.
So, I mean, part of this is, yes, your traffic's declining
and then your lesser traffic that you have,
you're treating them like misanthropes
and you won't provide them with the information
that they ask for so that maybe perhaps
they can become walk-in traffic
and actually buy a car from you.
I want to be very clear, y'all,
we are the busiest we've been all year right now
back at CarEdge.com because dealerships have less traffic
and because this is a buyer's market.
So, it's actually a great moment for our company
but it's a terrible moment for most dealers out there
in part because it's self-inflicted.
Less traffic coming to them
and the traffic that does come to them,
they're not actually providing pricing with.
It's a real pain in the butt
but this stat, I think, is incredibly damning.
This is a leading indicator for sales
and we already know sales for November down year over year
and this is saying that amount of traffic
that's coming into the dealerships, it's going down significantly.
It's the lowest it's ever been since they've been doing this survey.
Now, profitability under pressure.
Profit sentiment declined to 36 overall
with franchise dealers at 44 and independence at 33
reflecting margin compression from rising costs
and softer demand.
The profitability gap between franchise
and independent dealers persisted
with independence experiencing a more pronounced impact.
This is a story we've been talking about ad nauseam now.
Dealers are making less money per vehicle sold.
It is a buyer's market.
What does a buyer's market means?
It means you have more leverage.
You've always had the leverage as a shopper
because you can say no.
You have way more leverage today
than you did in the past.
One of the things we're going to talk about on today's show,
dad, the slowest selling cars for the month of December.
We have the latest and greatest data.
Go to caredge.com.
Slowest to see this information.
I'm a Volkswagen dealership
and I've got ID4s that have a 471 days supply.
I have no leverage.
I'm the dealer.
I'm desperate to sell these Volkswagen ID4s
or the Dodge Charger below it
or the Subaru Soltera below that
or the Grand Wagoneer below that.
The market dynamics have shifted significantly
and I love this report from Cox Automotive
because it's the industry telling you
that the market dynamics have shifted significantly,
not car edge.
Yes.
Cox doesn't want to put out this data.
They want to put out rainbows and sunshine
and they can't because the car market
is at a tipping point.
But this information would indicate
that for buyers it could be rainbows and sunshine.
For buyers, dad,
this is the best buyer's market we've seen
from before the pandemic.
Yes.
Yes.
We haven't seen dealers in this much pain
since pre-pandemic.
Correct.
Dealers that need to sell cars.
Automakers need their dealers to sell cars.
That was not the dynamic we had for
dealers three years there.
Dealerships need traffic.
Well, they're not getting it.
Okay.
Well, that's not a recipe for success.
I don't think so.
Let's keep going through the data points here.
It's so fascinating.
Sales environment weakens.
Again, we didn't write this Cox Automotive.
The new vehicle sales sentiment fell to 49
and used fell to 42, both below 50,
indicating a challenging retail environment.
Franchise dealers saw a new vehicle sales sentiment
fall to 49 and used at 53
while independent dealers reported even lower used
vehicle sales sentiment at 39,
highlighting tougher conditions for independence.
You want to talk about dealer desperation.
It's even more pronounced by your local
mom and pop independent car lot than it is
at your local Mazda dealership, for example.
Both are trending down, however,
and now is probably as good a time as ever to mention
we've got dealers joining us on the show
both tomorrow and Friday and the Grange
and then Joe Lewis.
So we're going to bring some dealers on
to talk about what their experience has been
over the past couple of months
and what's going on in their business.
Because obviously this data shows again,
especially for independent dealers,
they are struggling right now.
And we can compare this data
from Cox Automotive
with what these gentlemen are actually seeing
on the ground.
Yeah, absolutely.
Let us know some questions in the comments
or in the chat.
We can obviously queue those up for later in this week.
Inventory mixed.
New vehicle inventory increased slightly
to 59 while overall used inventory
remains tight at 43.
So this is the one piece of the puzzle
where there's some positive sentiment
is we have more inventory.
So we've got West sales sales
or we've got more inventory.
Then you've got economic sentiment
declines.
The economy index dropped to 39
from 43 in Q3.
Reinforcing concerns about macro headwinds,
both franchised 44 and independent dealers
37 saw economic sentiment decline,
but independent dealers expressed
greater concern about macro headwinds.
So there you go, man.
That's your car market has reached a tipping point.
That's what we've been talking about forever.
And thank you Cox Automotive
for sharing the data.
This is the dealer side, the industry side,
waving the flag.
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And you forgot to add one other thing.
That there's a meeting at the White House today
where the White House is going to announce
new policies in regards to emissions
and emission controls
so that they won't be quite as strict as they had been
with the hope of being able to make more cars
more affordable
because the manufacturers won't have
as great a cost associated with the emissions situations.
So when the White House jumps on board
and goes, oh, oh, the stuff's not affordable.
We need to do something about that.
And the only problem when the White House jumps on this
is this is a manufacturing effort at that point
and that doesn't change overnight.
That takes two to three years to change.
So if the White House is admitting
that there's an affordability crisis,
if the manufacturers are beginning to admit
that there's an affordability crisis,
if the dealers are saying we're seeing less traffic
and lower profit margins,
so they know there's an affordability crisis
and to have the White House try and do something about it
so that two to three years from now
cars might become more affordable,
that's not the real solution.
We need cars to become more affordable tomorrow,
not two years from tomorrow.
So let's spend a second on how do cars
become more affordable tomorrow.
It's manufacturer incentives and dealer discounts.
That's what we anticipate and quite frankly
with the initial data we have,
440% financing offers.
You'll see that up back at CarEdge.com soon.
440% financing offers is the highest
number of 0% financing offers we've seen all year,
up from 42 last year,
which 42 was the high water mark that we had set.
So that's the manufacturers stepping up and saying,
oh crap, we need to make these things more affordable.
We're seeing bigger and better deals on the dealership side,
which again, you looked at the profitability index,
it's gone down for dealerships.
All the data sources we look at, dealers are not making
as much money as they used to make on selling vehicles.
Again, the rainbows and sunshine,
it's for you, the car's shopper,
not necessarily at the dealership level.
That being said, there's probably some pretty big
stair step or manufacturer to dealer incentives this month
for them to hit volume thresholds.
I'm thinking Nissan dealers, for example.
They should be wanting to get rid of their vehicles
fast, rapidly, because they have a ton of money on the line
for hitting their volume threshold.
So it's a good moment to be a shopper.
Yes.
And it is officially a challenging moment to be a dealer,
to be on the industry side.
And to your point, efforts at the White House level,
the federal level, it's not like that's going to impact
the price of cars tomorrow.
No.
And even if the Fend drops interest rates,
another 25 or 50 basis points,
when you're talking about cars that are priced
as high as they are, and the average asking price today
was over $50,000, OK?
That 25 basis point drop or 50 basis point drop
is not going to make that car that is way more expensive
than a comparable car was five years ago.
It's not going to make that new car affordable today.
If it's a 50 basis point drop,
can we go to the CarEdge machine and do a payment calculation?
Let's do it, Popsides.
We're here at CarEdge.com.
What do you want to do?
Just pick a car.
Any car, doesn't matter.
Just pick a car.
Do you want to do an $84,000 Genesis?
Let's pick something that's closer to the average of $50,000.
It's been saved for 126 days.
I wonder why.
Closer to what price?
$50,000.
Find something that's closer to $50,000.
$62,000.
Wow.
Genesis.
It's a Genesis.
$54,000.
Okay.
All right.
So we've got a Genesis GV70 Select MSRP 54760 dealer invoice,
$52,022.
It should be shooting for this discount off of it.
So let's do an out the door with a car payment.
All right.
So let's say the out the door is $55,000.
All right.
Because you've got a nice discount.
Okay.
And let's say you financed it for 72 months.
As one would do.
Okay.
And let's say average new car rate today is about eight.
Yeah.
A little bit north of eight, but yeah.
Let's say it's eight.
Okay.
So what's that payment?
$964.
Now change the interest rate from eight to seven and a half.
Let's say there's a 50 basis point drop from the Fed.
It's not 75.
Yeah.
Hey.
It's not, let me do my little point.
All right.
We're going to have to go seven.
Okay.
We're down a whole basis.
Oh, the amount of finance changed.
$55,000.
All right.
Here we go.
937.
That's a whole base.
That's a whole hundred basis.
Yes.
And that was how much less?
$50.
$964 to $937.
So $30.
So at 50 basis points, it would be about 15.
And if the average new car payment today is about $750.
Is it really affordable at $735?
You tell me.
You tell me.
Is that going to make the difference?
And I think the answer to that would be a resounding no.
Yes, you'd be able to buy three more Starbucks coffees a month.
But is that enough for somebody to be able to say, yeah, I think that makes perfect
sense.
At $750, I couldn't handle it, but at $735 I can.
So the hope of waiting for interest rates to drop is, I don't know, I would say a false
hope, even if they dropped a point, 100 basis points.
It doesn't do enough.
So the price of the cars has to come down.
Yeah, absolutely.
I completely agree, which again, what levers do manufacturers and dealers have to pull to
get the price of the car to go down?
Incentives?
Dealer discount, again, fires market.
If you're going to go buy a car, you have more leverage than ever before to influence
those things.
And the third thing could be where the manufacturer says, OK, we're going to start building
less expensive cars instead of the higher profit margin, more expensive cars.
But that doesn't change what's going on for the current $3 million new cars sitting
there.
It's similar to the White House initiative, which will take months, if not years to come
to fruition.
Yeah, before we go to the chat here, I want to remind everyone back at CarEdge.com, as
we are in this period of time, there isn't great time to be shopping if you need a vehicle.
We do have our promotion running $150 off the car buying service.
We do it all for you, our team of professionals.
We have consultation calls to see if it's a good fit and 15% off CarEdge.
Bro, and again, I talked about at the beginning of the show, yesterday's after
yesterday's show, so many people have reached out to me directly sharing that they've
already saved money by doing the car insurance shopping.
You should be doing that once a quarter, every single quarter, every six months.
You should be shopping your car insurance.
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Click on insurance in the top navigation.
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Save some money and see if you can get a better rate.
Yes.
Let's come here, Dan, from Alex.
Thank you, Alex.
It's a very kind contribution.
Yes.
Four coffees.
We appreciate the four coffees.
Yeah, and I won't even drink Starbucks.
Is it worth waiting until March at the latest to buy a vehicle?
That's $2,000 out of my budget right now.
But there are no other examples of wife is delivering in April.
2024 Sienna XLE with the inverter.
I live in 98684.
Okay, so it sounds like, it sounds like for Alex, his wife's given birth.
Yes.
Congratulations to you.
And you need to get a Toyota Sienna XLE.
Yes.
So we're looking at a used one.
Yes.
Should I be buying a used one?
It's a 2024.
Oh.
Yeah, no.
We're looking for a 2024 Sienna.
Yeah.
We're looking for a used one.
So we're looking for a used one.
Yeah.
Should I do it now or should I wait until March?
It's $2,000 out of budget right now.
It's going to be worse in March.
Let's talk about that.
So what happens to used car prices in the springtime?
They go up.
Why?
They grow tax refunds.
It's tax season.
It's tax refund season.
It's spring selling season.
In March, it's like somebody hit a switch and customers come back to dealerships.
So, you know, will it be cheaper?
Well, it shouldn't be a little less.
There should be additional depreciation that happens to that vehicle over the next three
months.
Will that depreciation equal $2,000?
Absolutely not.
Yeah.
You know, we know Sienas are some of the fastest selling vehicles out there based
on market day supply.
So I don't think you'll necessarily find it for less money or significant enough savings
because it's the beginning of tax refund season and the beginning of spring selling
season.
Yeah.
Look, if I'm in the market to buy a used car, I'd like to get it done between now
and the end of the year.
I mean, anywhere is also fine.
But once we get into...
Once you get into late February and March, you're going to see prices go up again.
We got here from Igor, new 2025 Sienna over the used, overvalued and overpriced used
2024s.
But again, if already $2,000 out of budget, it's going to be a tricky situation there.
But I generally agree.
We generally agree.
New cars right now represent a better value than used cars because...
In many times.
Well, younger.
Yeah, then younger.
Yeah.
If you're looking for a 10-year-old used car, then it's not even a comparison.
But one, two, three-year-old used car typically in today's market is going to
make more sense to get the new vehicle instead.
We got here from Joe.
Thank you for this, Joe.
Thoughts on leasing a low mileage certified pre-owned vehicle?
I don't know if many people realize this.
You can lease used cars, in particular, certified pre-owned vehicle.
And many of the manufacturers will also offer their new car lease special rates on retired
service loaners.
Yeah.
So that could be a way to create a lower payment by leasing it and being willing
to do a low mileage lease on a low mileage CPO vehicle gives you another avenue to explore.
I personally don't have any issues with retired service loaners.
I've owned two of them.
We owned a TL at one time and we had an MDX at one time that were both retired service
loaners.
Yeah.
So if you're looking at a brand where the manufacturer allows the dealer to utilize the new
car lease programs on their certified service loaners and pre-owned vehicles, it could make
all the sense in the world.
Now let's come here.
We've got a great question from Candy Beagle.
How much discount should we ask for on a new 2024 that is still on the lot?
And I love this question, in part because we know, Dad, let me pull it up here really
quickly.
We know there is a higher level of new 2024s still for sale, same 20% or more on
leftover 2024 models.
In December, Justin and Rebecca on the team published this just the other day.
There's 54,000 brand new 2024 vehicles still on dealer lots right now, 16,000 of them are
Ford vehicles.
Yes.
How much of a discount should we ask for on those new 2024s?
Well, I'm thinking between 15 and 20%.
There we go.
There we go.
Yes.
How did I do?
He did fantastic.
Yes.
Okay.
Here's the deal.
Let's go show with someone because it's very important.
The data we brought you today comes from a brand that serves car dealers, Cox Automotive.
Look at their brands up here, AutoTrader, that's a dealer website, Central Dispatch,
Dealer.
What's this one?
Dealer.com.
What's the next one?
Dealer Track.
They work for the industry and they are painting a very clear picture here.
The same picture we've been talking about for months now, but share today's show
with someone who's in the market to buy a car, whether it's today or in the future.
Yes.
Because it's a public service announcement.
Everything has changed from five years ago when we were in the midst of the pandemic.
Everything has changed and the leverage sits with the shopper more than ever before.
The more informed and empowered you are, the better deal you can get and that
is critically important.
And the dealers are admitting to feeling it now.
They are seeing a decline in their profit margins.
They are seeing a decline in their traffic, whether it be digital phone or in person.
So they know that these issues persist and so you now have leverage that you didn't have
in the past.
Sounds like a tipping point, folks.
If we can help you out with anything, caredge.com, let me, my dad and our incredible team support
you through the car shopping process.
Just check out our homepage and scroll through it pretty, pretty please.
Even more about us and the work that we do every single day back at caredge.com.
We're calling it a show a couple of minutes early today.
I'm catching a ride back home to Washington, DC.
So I'm going to go make my way back home.
Pops, thank you for hosting me.
Well, thank you for being here and I look forward to seeing you on the news later
today.
My dad's got an interview.
Stay tuned.
It'll be on our YouTube channel soon enough.
Yeah.
News Nation 2 o'clock.
I'll be on live.
All right, folks.
We'll see you back tomorrow with more Car Edge Live.
We've got dealers joining us the next two days.
Let us know your questions and not wait to do it.
Thanks, everybody.
See you back here tomorrow.
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About this episode
The automotive market is experiencing a significant shift, with new car sales declining and used car prices depreciating rapidly. The latest Cox Automotive Dealer Sentiment Index reveals a drop in dealer confidence, signaling economic uncertainty and lower consumer traffic. Discussions highlight the challenges faced by dealers, particularly independents, as profitability declines and customer engagement wanes. Despite these challenges, buyers have more leverage than ever, making it a favorable time for shopping for vehicles. The episode also touches on potential future market improvements contingent on interest rate changes and manufacturer incentives.
Original notes
Today on CarEdge Live, Ray and Zach discuss the latest car price data and how the auto industry has reached a tipping point. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
for information about our collection and use of personal data for
advertising.
CarEdge Live
Ray and Zach Shefska, Bleav
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