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Car buyers are painfully aware that prices have gotten really expensive. But recent data show some signs of relief and a possible peak.
Automotive data provider Edmunds on Wednesday issued updated financing statistics for the fourth quarter. There was both good and bad news in the numbers.
The average new-car payment hit a record at $739 a month, up from $736 in the third quarter.
The percentage of buyers paying more than $1,000 a month for a new vehicle hit a record at 17.9% in the quarter, up from 17.5% in the third quarter and 15.7% in the fourth quarter last year. Before the pandemic, less than 5% of car buyers had monthly payments north of $1,000.
Neither record is a positive for wallets. But the rate of increase in both the average monthly payment and the percentage of buyers paying more than $1,000 a month is slowing.
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Also, more deals are being offered to buyers. The number of car buyers with 0% APR deals came in at 2.3% of sales, up from 1.1% of sales in the third quarter.
This is partly due to an increase in the number of cars available to buy. Dealers’ new-car inventory in December topped 2.5 million units for the first time since 2021, according to Cox Automotive’s latest report.
There’s positive news in used-car pricing, too. On an unadjusted basis, used-car prices dropped 1.1% month over month in December and are down about 20% from their peak in January 2023.
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Price relief has benefits for both consumers and auto makers. Americans bought more cars last year even as payments grew more expensive. Americans bought roughly 15.5 million new light vehicles in 2023, up from about 14 million in 2022.
It’s unlikely that will continue if prices keep rising. But as interest rates come down, cars should become more affordable. Cox Automotive sees sales growth continuing, predicting 15.7 million new cars sold this year.
Falling prices could mean weaker profit margins for auto makers, though Wall Street has already penciled in a moderation in profit margins.
Analysts project 2024 operating profit margins for
to come in at 5.5%, down 0.4 percentage points compared with 2023. Operating margins at
are expected to come in at 6.6%, down 0.8 percentage points.
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is expected to post 2024 operating profit margins of 10.4%, up from 9.9% in 2023. The EV maker has already seen significant profit margin pressure after aggressively cutting prices last year. Operating profit margins in 2022 came in at almost 17%.
GM stock is trading around $36 a share in recent trading, roughly $1 or $2 below levels last seen in early July when labor issues started to weigh on shares. Shares bottomed out below $27 a share in early November, amid peak labor fears. GM, Ford, and
ratified a new four-plus-year labor deal in mid-November. The year ahead should be less about labor and more about fundamentals.
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GM shares trade for about 3.9 times estimated 2024 earnings. Ford shares trade for about 6.5 times estimated 2024 earnings. Ford stock is at roughly $12 in recent trading. That’s about $3 below the level of early July. Ford stock bottomed out below $10 a share in early November, about the same time as GM shares.
Tesla trades like a growth stock at about 63 times estimated 2024 earnings. Analysts project 2.1 million units sold for Tesla in 2024, up from 1.8 million in 2023.
Write to Al Root at allen.root@dowjones.com
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