Edmunds: Q1 down payments & amount financed rise for used & new

Within hours of it being announced that CarMax was poised to acquire full ownership of the firm, Edmunds shared its first-quarter used-vehicle financing data, highlighting increases in both average down payments and total amount financed.

Edmunds reported that the average down payment for a used vehicle financed during Q1 came in at $23,958 with the average down payment being $3,345. A year earlier, Edmunds pinpointed those amounts at $22,200 and $2,679.

A surge into the used market probably will continue since Edmunds explained that consumers in the market for a new vehicle will likely have a harder time finding what they want at an affordable price right now due to severe supply shortages affecting the automotive industry.

Fueling record weekly wholesale-price rise, Edmunds determined new-vehicle inventory at franchised dealerships nationwide was down 36% in March compared to a year ago.

Analysts projected that the average transaction price (ATP) for new vehicles would climb to $40,563 in March compared to $38,601 a year ago, while the ATP for used vehicles is expected to hit $22,663 compared to $20,273 last year.

“The chipset shortage has snowballed into a bigger crisis for the automotive industry,” Edmunds executive director of insights Jessica Caldwell said. “Major auto manufacturing plants are implementing temporary closures, and we’re seeing the industry being hit hard on both sides: Retail customers are being offered fewer choices and paying higher prices, while fleet customers are likely seeing their orders delayed as auto manufacturers shift their focus to serving consumers.”

Edmunds noted that full-size trucks and large SUVs are among the vehicle categories most disproportionately affected by these shortages.

According to Edmunds data, full-size truck inventory was down by 60% in March compared to a year ago. Analysts suspected that the average transaction price for new full-size trucks is expected to climb to $54,763 compared to $51,164 a year ago, while the average transaction price for used full-size trucks is expected to climb to $34,445 compared to $28,156 a year ago.

Edmunds also mentioned in the new-model space that large SUV inventory decreased 56% in March compared to last year while the average transaction price for new large SUVs is forecasted to climb to $67,542 compared to $62,620 last March. And analysts added the average transaction price for used large SUVs is expected to climb to $35,035 compared to $31,232 a year ago.

“Full-size trucks and large SUVs have been a bright spot for automakers throughout the pandemic because of their profitability, but unsurprisingly these high-demand vehicles have also been the quickest to fly off the lot,” Caldwell said. “Unfortunately, these supply shortages translate to a bigger financial hit for automakers, and the Detroit Three are likely the most affected.”

And just like within used vehicles, the average down payment and amount financed for new models are higher year-over-year, too. Edmunds pegged the average down payment for a new vehicle at $4,729 in Q1, up by nearly $500 with the average amount financed jumping by more than $1,400 to $35,040.

“So far, automakers have been able to comfortably count on financially stable consumers focusing their spending on bigger-ticket vehicle purchases during the pandemic,” Caldwell said. “But as vaccines continue to roll out and consumers crave new experiences and products to spend their money on, automakers and dealers will need to prepare to get more creative in marketing the limited inventory that they have on hand.”

In what could be good news for franchised store managers, Edmunds experts advised consumers in the market for a new vehicle to start shopping sooner rather than later, as they anticipate that the chipset shortage is likely to affect pricing and inventory through at least the second half of 2021.

“Americans looking forward to their newfound freedom this summer in the form of a road-trip vehicle should be doing their research now,” Edmunds senior manager of insights Ivan Drury said.

“The summer sales that consumers can typically look forward to might not look the same this year, and even with stimulus checks on the way, the only relief that price-sensitive car shoppers might find might be in lower interest rates and the increased value of their trade-in,” Drury went on to say.

Quarterly New-Car Finance Data

(Averages)

Quarterly Used-Car Finance Data

(Averages)

Source: Edmunds