Dealers Need 'Wait And See' Buyers to Act Now: Cox Automotive

Many increasingly price-sensitive auto shoppers are staying on the sidelines hoping for better deals in the near future, according to Cox Automotive.

Those better deals are likely, assuming the Federal Reserve cuts interest rates before the end of this year and manufacturers continue to hike incentives to help dealers move the metal, says Jonathan Smoke, chief economist for Cox Automotive.

“Hesitance seems to be the wise path if people expect prices and rates to be lower in a few months’ time,” he says in a recent midyear report.

In addition, Cox Automotive research shows rising uncertainty among dealers and customers related to the upcoming presidential election. That uncertainty has customers sitting on their wallets, too.

“Politics are the poster child of uncertainty,” says Erin Keating, executive analyst for Cox Automotive, during the webinar that also updated Cox Automotive forecasts.

For the full year, Cox Automotive expects new light-vehicle sales of 15.7 million, up from 15.5 million in 2023. That estimated total for 2024 remains unchanged since January, except for a slightly bigger share of fleet sales and a slightly thinner share of retail sales to individual customers.

Separately, Cox says both shoppers and dealers expect the election will affect interest rates and inflation, based on a survey earlier this year of more than 500 auto shoppers and more than 1,000 U.S. dealers.

“Interest rates are enemy No.1, according to dealers,” Smoke says.

He adds that a majority of customers say they expect the election to affect auto sales one way or the other: 32% say they expect sales to get better, 21% say they expect worse and the rest don't expect any impact.

Dealers say interest rates are No.1 among “factors holding back business” in the Cox Automotive Dealer Sentiment Index for the second quarter, at 59% of respondents, up from 53% a year ago.
With the election ahead, it makes sense that the biggest increase on that "factors holding back business"  survey question is for “political climate” at No. 4, cited by 36% of dealers, up from 29% a year ago. 

Meanwhile, by most measures, new-vehicle affordability is improving, but Smoke says the improvement generally does not translate into higher sales.

Besides the overall worry about inflation and interest rates, consumers also hesitate to buy because prices are still much higher than before the pandemic, even though they’re down from an all-time high in 2022, he says.

According to Cox Automotive, the average new-vehicle incentive as a percentage of suggested retail was around 7% in April, up from a recent low of around 2% in 2022. However, that’s down vs. more than 10% for much of 2019 and 2020.

Charlie Chesbrough, senior economist for Cox Automotive, says the average new-vehicle transaction price is $48,389. That’s about $5,000 higher than it would have been without the high-price bubble created by the COVID-19 pandemic and the resulting shortage of new vehicles, he says.