When it comes to smaller new-car segments, one of the trends at play in the slowdown is “an affordability issue,” says Autotrader senior analyst Michelle Krebs.
“There are just many consumers who are being frozen out of the new-car market,” Krebs said during the Q&A portion of sales day conference call with the media on Tuesday. “And I think it’s having some impact, especially on that small-car market, because that’s where you’d typically see very budget-minded people going to.
“And people are keeping their cars longer, so it suggests that … consumers are challenged at that end of the market, too, financially,” she said.
So, where are those would-be buyers who are “frozen out” going? Are they turning to late-model and certified pre-owned, or perhaps heading toward independent dealer lots? Or are they out of the game altogether?
“We haven’t broken out who’s doing what, but we certainly think that it’s a factor, because wages have not gone up and yet prices of everything — health care, education, et cetera — have gone up, as have car prices,” Krebs said. “And so people are holding on to their cars longer.”
Citing Polk data, she said the average age of a vehicle on the road is 11.5 years old, adding that “despite record new-car sales, that’s gone up.”
“And we are seeing a robust used-car market. So they’re either not playing the game yet or they are buying used,” she said. “So, I think a lot of those might have been a possibility for the compact market, and they’re just frozen out.”