Auto Market Update
Labor Market:
• January added 130,000 jobs, above expectations
• 2025 job growth revised sharply lower from 584,000 to 181,000
• Monthly average reduced to just 15,000 jobs
• Unemployment fell to 4.3%
• Wages up 3.8% year over year, still outpacing inflation
• Weaker underlying labor trend increases probability of Fed rate cuts later this year
Inflation:
• CPI slowed to 2.4% year over year
• Core CPI at 2.5% year over year, up 0.3% month over month
• Energy prices declined 1.5% in January
• Used vehicle prices fell 1.8% month over month
• Shelter inflation remains elevated at 3.0% year over year
• Disinflation trend intact, but Fed remains patient
Auto Credit Conditions:
• Dealertrack Credit Availability Index steady at 100.0, best level since October 2022
• Subprime share increased to 15.7%
• Negative equity rose to 56.3%
• Yield spreads widened 31 basis points to 7.14%
• Median credit score on new auto loans fell from 724 to 716
• Subprime originations up 12% year over year
Used Vehicle Demand and Inventory:
• Retail used-vehicle sales pace: up 3.3% year over year and up 4.6% month over month (latest 30-day period)
• January used retail sales: 1.37M units (vs 1.31M in December)
• Used supply: 48 days in January, down nearly 3 days from December and flat versus last year
• Supply remains constrained: 9 days lower than the same time in 2022
• Average used listing price: $25,533 (up just over 1% YoY, down more than 2% MoM from $26,120)
• MoM price decline driven primarily by SUVs and pickups
Affordable Used Constraints and Mix:
• Sub-$15K inventory remains tight: 37 days’ supply (11 days below industry average)
• Top five sellers’ average price: $23,668 (about 7% below overall average listing price)
• Top brands Ford, Chevrolet, Toyota, Honda, Nissan = nearly 50% of used vehicles sold
CPO:
• CPO sales up 1% year over year in January
• CPO sales down 7.6% month over month to 204,649 units (from 221,418 in December)
• CPO outperformed new vehicles, which were down 24% month over month
Dealer Takeaways:
• Expect a tax refund demand lift to build from mid-February through March, typically strongest for value used and subprime to near-prime buyers
• Early-year used momentum (January volume up YoY and MoM) suggests refund activity may already be supporting used demand and stabilizing wholesale trends
• Inventory strategy: prioritize frontline-ready units in high-velocity segments (compact/mid SUVs, value sedans, light-duty pickups) and protect sub-$15K supply where possible
• Affordability messaging: emphasize used payment advantage as inflation eases and consumers remain cautious on total debt loads
• F&I and credit execution: credit is more available, but risk is rising (negative equity, higher subprime mix, wider spreads) — tighten lender routing, verify PTI/LTV, and stay disciplined on structure
• Reconditioning speed matters: refund-driven shoppers are highly payment-focused and shop-ready; reduce time-to-line and keep merchandising fresh
• Staffing and processes: align BDC, appointment capacity, and lender coverage for higher lead volume and faster close windows during peak refund weeks
