The new and used car market is experiencing a lot of turbulence with prices going up and down and vehicles that are negotiable and non-negotiable. TrueCar puts out a monthly industry report which indicates that the percentage of people paying over MSRP for new cars is decreasing, and the number of dealerships asking for market adjustments is also going down. This is partly due to the increase in inventories for some models and brands in some regions.

One of the biggest indicators for the new car market is Fleet Sales. Fleet Sales were up between 59% and 74% year-over-year, and this is significant because many automakers had stopped making fleet vehicles due to the shortage of chips and supplies. However, with the chip shortage easing, manufacturers have seen a huge increase in Fleet Sales, which is a good sign that they can produce vehicles again to satisfy both fleet and consumer demand.

Average transaction prices for new cars continued to increase year-over-year, but there was a slight decline month-over-month. With the increase in Fleet Sales, increased inventories on dealers’ lots, and longer periods of inventory sitting, we can expect average transaction prices to go down.

Manufacturers have been making the intentional decision to stop making entry-level options and focus on more profitable higher trim options. However, with the increase in Fleet Sales production, it indicates that manufacturers have the capability to produce those lower-end models, which should eventually trickle down into lower average transaction prices. As interest rates continue to go up, the average new car auto loan is almost at 8.5% and the used car auto loan is almost 13%, which may price consumers out of the market. This may force manufacturers to produce more of the less expensive vehicles and increase the size of incentives offered to consumers.

The used car market is also showing signs of change, with data from Black Book indicating that dealers are bringing on more cheaper vehicles. Depreciation is slowing down and prices are starting to level off, which is a positive sign for dealers. As the retail automotive industry traditionally experiences slow sales in January and February, we can expect incentives to go up as we move into the spring selling season. With the decrease in income tax refunds, consumers will be closely monitoring their discretionary income, which may impact the used car market.

In conclusion, the new and used car market is experiencing turbulence with prices going up and down and vehicles that are negotiable and non-negotiable. However, with the increase in Fleet Sales and slowing depreciation in the used car market, it is a good sign for dealers and consumers alike. As the retail automotive industry moves into the spring selling season, we can expect to see increased incentives and a better understanding of the market’s direction.