Interest Rates Ups and Downs, Cheaper Used Cars, Charge Wars Over 

March 21, 2024
It’s Thursday and we're talking about the impact of the Fed’s interest rate decision on Dealers. We’re also covering the dramatically changing used car market, as well as the end of the charging platform wars as we’ve known them. 
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Show Notes with links:

After the Federal Reserve's decision to keep interest rates steady at 5.25-5.5%, auto dealerships face a mixed bag: relief from further hikes but challenges from existing high rates continue.some text

  • Yesterday, the Federal Reserve decided not to adjust the benchmark interest rate, remaining at 5.25-5.5%. This was primarily due to a preference for a 2% inflation target while recent figures showed a 2.4% increase year over year in January.
  • Currently, The average interest rate for new vehicle loans rose to 7.2%, with used vehicles at 11.9% in Q4 2023.
  • According to Cox Chief Economist Jonathan Smoke, the anticipation of future rate cuts could deter consumers from making immediate purchases. A week ago, Smoke said, “"It sends a clear message that, 'You need to wait because rates are going to be lower later in the year, so it takes a lot of urgency out of thinking of buying right now."
  • According to a recent dealer sentiment poll, Interest rates remain a top challenge for franchised dealers, with 70% indicating a negative impact on their business.

The gap between new and used vehicle prices is widening, leading to a significant rise in sales of used and certified pre-owned vehicles, according to a new report from ZeroSum.

  • The average list price for used vehicles is decreasing for the eighth consecutive month, from $30,000 in June to just over $26,000.
  • The average new-car price is falling below $50,000 for the first time in over a year, but the decline in used-car prices is outpacing this, widening the price gap between new and used vehicles.
  • Used vehicle inventory is dropping to 1.89 million units, still far above February 2023’s 1.34 million, while the turn rate is jumping from 57% in January to 71% in February.
  • The certified pre-owned segment is rebounding from a slow fourth quarter to reach 163,000 sales in February. Inventory is dropping below 200,000 units for the first time in five months, and the turn rate is soaring to 86%.
  • According to Jeff Englishmen, ZeroSum vice president of dealer success: "The sustained pressure on pricing is having an effect on the movement of not only used vehicles but new vehicles as well. The slower decline in new vehicle pricing is widening the gap between the two, which is causing consumers to carefully consider their options."

It looks like the charging platform wars are winding down for good as ChargePoint announces the integration of Tesla’s North American Charging Standard (NACS) connector cables into its EV charging infrastructure. some text

  • This move, originating from the Campbell, California-based EV infrastructure giant, is a significant step towards unifying the charging experience for both Tesla and non-Tesla drivers. 
  • In an announcement, appropriately on X (formerly Twitter), the company revealed that NACS cables for its Express 250 DC fast charger are now ready for EV charging site owners to order, with the capability to retrofit these cables onto existing DC fast charger models due to ChargePoint stations' modular design.
  • New ChargePoint models can ship with the NACS cable ready to go

Paul J Daly: 0:19

Hey, it's Thursday already it is March 21. Today we're talking about the interest rates ups and downs a lot. They're cheaper used cars, and the charge wars may actually be over. We'll see the people falling.

Kyle Mountsier: 0:38

Maybe Maybe lots of dominoes are falling today in the show. I think that's a good way of, you know,

Paul J Daly: 0:44

you know, there was snow falling in Syracuse this morning.

Kyle Mountsier: 0:48

lievable bro, it was like 65 degrees Sunny.

Paul J Daly: 0:52

I know. I was watching pizza outside and doing their thing and this is spring in Syracuse. We always get that like that bluff, bluff springtime, like two weeks ago, where it was like warmer than it was in Nashville. And then it's like, bam. I mean, there's when I got to the office. There's less snow here than there is out out in the hills. But, you know, there's no whatever you

Kyle Mountsier: 1:14

um, so I feel mildly sad for you, but it's a choice.

Paul J Daly: 1:18

No, absolutely. Don't feel sad. Don't feel sad at all. Don't feel sad. You won't be feel safe. You know, everybody. Pros and Cons pros and cons. Did

Kyle Mountsier: 1:28

you know that today's the start of like March Madness officially? Are you a bet do you follow basketball around this time of year? A college basketball? No, we don't.

Paul J Daly: 1:37

Basketball is a sport I played most growing up and I follow it the least Now

Kyle Mountsier: 1:41

sometimes that happens. I see that a lot with people they're like I played it. I don't really need to watch it.

Paul J Daly: 1:46

You know and a lot of basketball a lot and yeah, so no, I don't follow it. I mean, like I know the brackets and I just was never in the college sports either. Grew up in Philly. So it's a big pro sports down. Yeah. And then like, you know, NBA has just turned into a WWE as far as I'm concerned. meets meets like days of our lives. It's like this weird. That's right. That's exactly it's WWE, like all of all of the nongrantor muscle. Yeah, Days of Our Lives drama. Yeah, it's so and so no, but a lot of people do. And March Madness is a big thing. And I live in Syracuse. So you know, Syracuse is a big, you know, college basketball town. That's why they are they in the tournament? I don't even

Kyle Mountsier: 2:27

know they've been. They've been struggling.

Paul J Daly: 2:30

Okay. Yeah, if they were in tournament, I'd know it and see it.

Kyle Mountsier: 2:34

I would do would see it. They would be everywhere up there. Yep. I

Paul J Daly: 2:37

know. Well, look, this isn't a tournament but we have 54 days until a soda con. Want to thank our presenting sponsors Reynolds Reynolds and goober Gu. For making it happen. We have so many little events happening in this big event. We have a well can breakfast. Day one on the 15th we have the Maryland auto Dealers Association having their annual meeting on day two. We have we'll get there in New York Times best selling author of unreasonable hospitality. As our closing keynote, we have to nail Delgado as our opening keynote, we have Vinnie 60 speakers in between the two breakouts, mainstage sessions, podcast stage, a lot of cool swag, a lot of surprise and delight, a lot of hospitality. And hopefully you, dear listener,

Kyle Mountsier: 3:25

it's like you ever seen that like money? The like money machine gun? It's like, it's like we're like, Yes, I am writing amazing. This is what I'm excited about. I'm just like, ready to eat popcorn. And listen,

Paul J Daly: 3:39

what about what I love about love and hate about the event all at the same time. What I love is that it features you all it features the amazing thought leaders and dealers in this community that get to share best practices with one another. You know, and so it's like you and I spend a lot of time curating the chemistry in the panels and the people that get to come and speak and we can't have everyone. So that's the awesome part. The crappy part is you and I can only be one place at one time. And there are three things going on most, most all the time. Yes, well, we hope you're there go to a soda Get your tickets if you're a manager bring a couple of people with you. Because here's what happens. Ack the whole nine yards. Yeah, we don't solve problems on stage we start conversations on the stage and then you'll find out when you get to ASOTU CON that the conversation continues after this age and change actually begins to happen and things become implemented because of the relationships formed and the synergy that happens so there really is no other event like it in automotive we hope you can be there. There you go. What else you got to check out the bills

Kyle Mountsier: 4:45

is the dates podcast today. Another great event and automotive use car week and yes automotive summit this month. You got to hang out with that we're streaming at one o'clock Eastern on all our platforms. You can find it already on any where you find your podcasts search Auto Collabs very nice.

Paul J Daly: 5:03

Alright, let's get into some news. Go things Domino's, okay after the Federal Reserve's decision to keep interest rates steady, they're holding steady. They said this yesterday at 5.25 to 5.5%. Auto Dealerships are facing this mixed bag relief from further hikes but challenging from existing rates obviously going to continue yesterday, they decided not to adjust the benchmark rate, primarily due to a preference for a 2% inflation target to the current mark is still 2.4% not quite where they want it. So they're going to hold steady. The average interest rate for a new vehicle loan rose to 7.2%. With us vehicles at 11.9%, average in q4 of 2023. And according to Cox, automotives, Chief Economist, our boy Jonathan smoke, the anticipation of future rate cuts he's saying could deter consumers from making immediate purchases just a week ago, he said, quote, it sends a clear message that you need to wait because rates are going to be lower in the in the year. So it takes a lot of urgency out of thinking of buying right now. So the flip side of that is now they said they're not lowering interest rates right now, the people who are might be on the bubble are going to say, okay, they're not going to go down. Let's get to the dealership. Let's buy a car. According to a recent dealer sentiment poll, interest rates remain a top challenge for franchise dealers with 70%, indicating negative impact on their business.

Kyle Mountsier: 6:26

This is like we could do a whole hour show on this one, bring in a whole bunch of people bring in Jonathan, a bunch of dealers and you get a mixed bag of results on how it's impacting different people in different socio economic sectors of of the country. Because I hear some people feeling significantly impacted by this. You know, we're on yesterday on a webinar with with Ron Burchard group, just saying, hey, look, we've got opportunities, because the financing partners that we have, and we're actually winning in the affordability race. So I think they're, you know, depending on where you're at in the country, depending on your the demographics, you're feeling the impact of this at a different rate. Yeah, but it's still like to think the average new vehicle loan at 7.2%. Almost close close to double what it was just a few years ago. Yeah. You know, it's, it's got to be sidelining buyers, I haven't seen any of the raw stats of like, this is how many buyers were sidelining in the market. We saw that when we had inventory shortages, and I'm sure Cox is working on that data. So it'll be interesting to see like, what buyers are sidelined? And what how does the market respond when interest rates most likely drop sometime later this year or early next year? Because it could be another one of those just like floods for the automotive industry. So you can stay afloat. Stay ahead before then understand affordability. You got good things coming, I'm

Paul J Daly: 7:53

sure. Yeah. And in the meantime, I think a lot of OEMs taking advantage of the high interest rate situation by putting their incentives on interest rates, I've seen that instead of purchase price. You know, it may be the same dollar amount, but psychologically it's different. Yep. Right, psychologically is different. So and

Kyle Mountsier: 8:08

I think like getting this to the ground, right? We always ask ourselves, what does this mean? If you're a salesperson, if your sales manager in the business, you're sitting there going, what do I do with this today? I think it's empathy, one for the consumer, but also the education that, you know, you you may want to take the incentive on the APR as opposed to the cash incentive if there are a balance of that. Just because the long term savings could be more significant as interest rates rise, and stay up. Speaking long term

Paul J Daly: 8:39

savings the whole big way. Midterm savings midterm, it turns out we don't talk about terms the gap between new and used vehicle prices is widening, leading to a significant rise in sales of new absorber used and certified pre owned vehicles. According to a new report from zero sum. The average list price for used vehicles is decreasing for the eighth consecutive month. Remember when it was over$30,000 in June, now it's just over $26,000. The average new car price is now fallen below 50 $50,000 For the first time in over a year. But the decline in use car prices is actually outpacing it widening the gap between the price of a new car and a used car. Used inventory is actually going down as well to 1.8 9 million units still far above February 2023 which was all the way down to 1.34 units. But the turn rate is actually going faster so we have more inventory the last year but the turn rate is jumping from 57% just last month is 71% in February or 57 Wow. In January 71% February, certified pre owned segment also rebounding from a slow fourth quarter to reach 163,000 in sales and inventory in pre owned also dropping as well according to Jeff Englishmen zero sum Vice President of dealer success, he says, quote, the sustained pressure on pricing is having an effect on the movement of not only used vehicles, but new vehicles as well, the slower decline in new vehicle pricing is widening the gap between the two, which is causing consumers to carefully consider their options.

Kyle Mountsier: 10:16

Yeah, I mean, like, this is the time to be a great used car dealer. Right? Understand what I mean, I guess there's not really ever a time to not be that because that's where profitability is as its highest, because this is when you benefiting being feeding. But this is when you benefit, like from being great. Because as you know, as you have to look right now, at a very, very 14 or seven day, historical to understand where the market is because prices are dropping at the rate that they are. You could be squeezed on margins if you're not careful with your turn rate. So recognizing that we've seen in eight months, a$4,000 decline in average prices means, hey, look, you might want to continue to look at stocking a lower priced inventory, you see interest rates, saying hi, like we said in the first story. This this is an opportunity to watch the market over March and April, especially as tax incentives are extremely high. This year, we're seeing tax season already, like heating up pretty well. You're gonna have opportunity to help those buyers, if you have the right inventory in stock, the lower price inventory, get into a used vehicle because they're still not able to consider the new vehicle because the prices haven't dropped at the rate that you've seen on the used man. So

Paul J Daly: 11:33

true. I love the fact that the dealers that are part of this community, so focus on a regular weekly basis, daily basis on being great use car dealers always seem to have a leg up in whatever situation we're in. But really when the situation hits now, you know they have their inventory, right? They have the sales process, right. And when when the getting is good, they're getting it all so well because when you

Kyle Mountsier: 11:57

have a great use cooperation, you do have the opportunity to create your own market as opposed to absolutely the market is driven significantly by the OEMs in both inventory and marketing. And in use, you get the opportunity to create your own market by the inventory that you have in the marketing that you do in your market segment. So check out for that

Paul J Daly: 12:16

well secret and

Kyle Mountsier: 12:18

check all those things down market.

Paul J Daly: 12:23

It's been a long time coming. Looks like

Kyle Mountsier: 12:25

the charging platform wars are coming to a close as major charger. Network charge point announces the integration of Tesla's and ACS or North American charging standard connector cables into its evey charging infrastructure. In a tweet two days ago, the company revealed that nacsw catalytic cables for its Express 250 DC fast charger are now ready for evey charging site owners to order the capability to retrofit these cables on to existing DC fast charger models due to charge point stations modular design so really cool that they've got this kind of like plug and play opportunity. The the Evie infrastructure giant charge point is definitely interested in unifying this charging experience for both Tesla and non Tesla drivers. Which is massive for them because they get the revenue now potentially of the Tesla driver

Paul J Daly: 13:22

without a doubt and the data. Yeah, yeah, because I mean Tesla drivers always preferring a Tesla Supercharger when possible. But now those Tesla superchargers are gonna start getting a little more crowded. Right? Maybe they're gonna see that Ford Maki, and they're like, I'm not charging next to that thing right. Now, but But realistically, right, the Tesla chargers are going to get more crowded. Not a lot of people have adopted the standard that's only going to increase as the cars begin to be shipped with, with the nacsw port on them. So ChargePoint say like, okay, yeah, we'll take that market, right. And the fact that they weren't modular is brilliant, because now they can have the direct people to have to fumble around with an adapter. And guess this is a big domino falling. Right? You have to believe that every new unit coming out now is going to actually

Kyle Mountsier: 14:09

is interesting. One of our writers Christie put out an article this morning if you get our newsletter, you can find it or go to our homepage about just the history of charging and also the Evie. The Evie adoption plans is announced on Wednesday by the EPA and the change in that and one of one of the key markers is whether or not we can get private and public charging infrastructure in place and time and this is just a feather in the cap for the NACS standard to get that adopted more quickly. So there you go. All

Paul J Daly: 14:43

right, everybody you got to Thursday to do you have people to serve you have used cars to price sell, flip all that good stuff. But whatever you do out there, just make sure you come to a soda con i know that's a big ask

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