All Things Used Cars Ep. 47 "Q2 Economic Outlook with Jonathan Smoke"

“The next night Pharaoh dreamed about 7 sickly cars devouring the 7 healthy cars…” Economist 41:4
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All Things Used Cars Ep. 47 "Q2 Economic Outlook with Jonathan Smoke"

Friend and host of All Things Used Cars, David Long,  invited Cox Automotive Chief Economist, Jonathan Smoke to speak with the clubhouse community. To a soundtrack of his design, Jonathan entered Clubhouse to look back on Q1 and share some data and insights going into Q2 and beyond. 

A little recap of Q1.

The market faced plenty of shake-ups in Q1. Several factors led to a bumpier period than envisioned at the cost of consumer sentiment.

  • Record covid cases
  • Harsher winter weather than the last few years
  • Russia's invasion of Ukraine
  • The Felicity Ace cargo ship Fire
  • An earthquake in Japan
  • Canadian trucker strikes

Energy and raw material prices were dramatically affected. Inflation hit consumers in their most vulnerable places -- food, gas, and housing. Inflation led to the Fed increasing interest rates by a quarter-point with projections of two additional points by the end of the year. 

Updates going into Q2? 

  • Covid cases are 97% lower than the Omnicron high.
  • Energy prices are slowly coming down.
  • The US has 3.6% unemployment and the lowest jobless claims since 1968
  • The war in Ukraine continues with no reliable indication of an ending.

Consumer sentiment is recovering. Current data shows confidence is back to a pre-Ukraine war level. This is good news for dealers because long-awaited tax returns coincide with the return of confidence.  

The number of returns delivered to taxpayers has finally crossed the halfway point. Average tax returns are up 12% year over year. The Fed's interest increases are hitting home loans harder than auto loans, leading customers to consider new and used vehicle purchases optimistically. 

Harvest time. 

"This quarter, especially in the used vehicle market, is where you want to focus on sales while planning to be more conservative." -Jonathan Smoke.

When looking beyond Q2, Jonathan urged a harvest time mindset. Challenges are coming by the end of the year that will persist into next year. With some OEM delivery delays possibly stretching into 2024, used vehicles in the five years or younger group will become more sought after. Now is the time to sell and plan for the challenging days. 

What now?

A few specific things Jonathan mentioned bolstering as the year progresses:

  • Establishing a solid vehicle acquisition network.
  • Becoming more familiar with EVs.
  • Partnering to innovate in the digital landscape. 

All Things Used Cars will continue to host Jonathan Smoke quarterly for these snapshots of the market's past, present, and future. 

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