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Auto Market Update

 

Economic Overview

The economy is sending mixed signals, but the biggest near-term positive is tax refund season, which is injecting meaningful cash into the consumer market.

• Average tax refunds are running $3,804, up about 10% year over year.
• Total dollars returned to consumers are up nearly 7%.
• Consumers have more immediate down payment capability.
• Refund checks are already supporting used vehicle pricing at Manheim.

You will hear Gas prices jumped roughly 13 percent in the past week, now averaging about $3.46 per gallon, largely driven by geopolitical tensions but should be short lived.

The US and International Energy Agency and multiple countries are also releasing reserves.

Around 300–400 million barrels could be released globally to stabilize markets

The labor market also softened slightly, with the economy losing about 92,000 jobs in February, but wages are still growing.

Interest rate relief may be coming later in 2026

• Markets are expecting two Fed rate cuts this year, likely around June and September.
• Floorplan and retail finance pressure may ease in the second half of the year
  Affordability should improve if lending rates follow mortgage rates lower

Consumer spending is broadening

• Consumer spending is no longer concentrated only among high income consumers.
• Vehicle demand is spreading across more income segments
• This supports volume sales rather than just premium vehicle demand

Deman remains strong

• Despite softer overall consumer confidence, vehicle purchase intentions are still up 11% year over year. That suggests shoppers still want vehicles even if they are cautious about the broader economy.
• Consumer credit growth is also slowing, expanding at just a 9 percent annualized rate, which suggests consumers may be becoming more cautious about borrowing.
• Fleet demand also strengthened, particularly in commercial sales, which jumped 23 percent month over month.

Dealer Takeaways:

• Demand is still healthy despite economic caution
  Even with softer confidence and weaker job growth, vehicle purchase intent remains strong, showing consumers still need vehicles and are still in market.

• Affordability may improve later this year
  Expected Fed cuts could reduce both retail finance pressure and floorplan costs in the second half of 2026, creating a better selling environment.