Incentives reach six-year low in February amid tight supply | Auto Finance News Incentives reach six-year low in February amid tight supply | Auto Finance News
Auto Finance News
Subscribe
  • Home
  • News
    • All News
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Compliance & Regs
    • Risk Management
    • Capital & Funding
    • Powersports
  • Events
    • DEMOvation Challenge 2021
    • Auto Finance Risk Summit
    • Auto Finance Summit
    • Auto Finance Innovation Summit
  • EXCELLENCE
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest
    • Magazine Issues
  • Podcast
  • Data
    • Lender Ranking
    • Fixed Rate Outstandings at Banks
    • Securitizations
    • Market Share Monitor
AFN PLUS
Wednesday, April 14, 2021
Log In
No Result
View All Result
Auto Finance News
  • Home
  • News
    • All News
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Compliance & Regs
    • Risk Management
    • Capital & Funding
    • Powersports
  • Events
    • DEMOvation Challenge 2021
    • Auto Finance Risk Summit
    • Auto Finance Summit
    • Auto Finance Innovation Summit
  • EXCELLENCE
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest
    • Magazine Issues
  • Podcast
  • Data
    • Lender Ranking
    • Fixed Rate Outstandings at Banks
    • Securitizations
    • Market Share Monitor
AFN PLUS
Log In
No Result
View All Result
Auto Finance News
No Result
View All Result

Incentives reach six-year low in February amid tight supply

Inventory woes also contribute to higher prices and stronger retention values

Amanda Harris by Amanda Harris
March 30, 2021
in Risk Management
Reading Time: 2 mins read

Tight vehicle supply has contributed to a six-year low in incentive spending, higher prices, and positive retention values.

Incentive spend as a percentage of the average transaction price sat at 8.4% in February 2021, the lowest point since April 2015, Charlie Chesbrough, senior economist at Cox Automotive, said Monday during Cox Auto’s first quarter Industry Insights webcast. “As long as sales are not disrupted, there is a benefit to having tighter inventories,” he said, adding that incentives are likely to remain scarce as supply constraints continue.

Inventory levels were down 22% year over year in March at 2.7 million units, while supply sat at an average 71 days, a 30% YoY decrease. “Demand from retail buyers has been surprisingly strong during the pandemic, but it faces a growing headwind — supply,” he said. “The shutdown of factories last spring due to the virus, coupled with ongoing supply chain disruptions since has kept inventories from rebuilding.”

Still, the seasonally adjusted annualized rate has been “relatively healthy,” Chesbrough said. SAAR for total light vehicle sales is projected to reach 16.4 million units in March, an increase of 53% YoY and 10% from February, according to TrueCar.

However, the SAAR could change its path in the next quarter as inventory struggles to keep up with sales, Chesbrough noted. “Days of supplies spiked last year during the shutdown, but quickly fell and has been below previous-year levels since,” he said. “It may be too soon to declare tight supply a new normal, but it’s certainly a new normal for now, and certainly one for the remainder of the year.”

Low supply is also keeping vehicle prices high, with the average price sitting at $40,000 in March. Seasonality is a factor, but prices continue to increase YoY — climbing by 7% as of March.

Higher prices also contributed to an upward shift in retention values in 2020 that has continued this year. At the end of February, off-lease retention values on 3-year-old used vehicles increased 5.2% YoY to 66% of the car’s value, Chesbrough said, adding that lease maturities will be a “big opportunity” for the industry this year.

Cox Auto estimates that the industry will see 4 million lease maturities in 2021, many of which will carry equity because of higher-than-expected values when they expire, Chesbrough noted.

Despite several bright spots, inventory continues to be a “major obstacle” in the auto finance market, with the full impact expected to become clear in the next quarter, Chesbrough said.

Auto Finance Risk Summit, the premier event for risk and compliance in auto finance, returns May 11-12, 2021 as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceRiskSummit.com.

Tags: Cox AutomotiveincentivesinventoryMag LeadersPremiumSAAR
Previous Post

Experian’s Melinda Zabritski talks Q4 financing trends

Next Post

Watch: How remote purchasing causes regulatory concerns for lenders

Related Posts

US Chips Act shouldn’t favor certain sectors, tech groups warn
Risk Management

US Chips Act shouldn’t favor certain sectors, tech groups warn

April 14, 2021
Used-Car Values Hold Up Despite Forecasted Depreciation
Risk Management

Subprime originations rebound in March, reach highest level in a year

April 13, 2021
Tricolor Auto launches AI-powered software service
Risk Management

Santander Consumer USA’s RL Prasad joins Auto Finance Risk Summit for fireside chat

April 13, 2021
Next Post
Identifying and addressing the rise in credit washing, synthetic fraud

Watch: How remote purchasing causes regulatory concerns for lenders

By subscribing you agree to our Terms of Use and Privacy Policy

Latest Magazine Issue

INNOVATION & TECHNOLOGY

My BMW app integrates BMW Financial Services for omnichannel experience

My BMW app integrates BMW Financial Services for omnichannel experience

April 6, 2021
‘Chargers everywhere’: Biden maps $174B path for EV boom

‘Chargers everywhere’: Biden maps $174B path for EV boom

April 1, 2021

CORONAVIRUS

direct to consumer lending

April brings uptick in 0% APR financing

April 9, 2021
Dealers Feel the Pressure of Competition in Used-Car Market

HyreCar sees surge in delivery drivers amid pandemic-spurred shift

April 8, 2021

SPONSORED

PenFed auto marketing campaign promotes its open charter

Examining effective specialty recovery processes in auto finance

April 12, 2021
Closing the gaps in the digital lending experience requires a new way of coaching agents

Closing the gaps in the digital lending experience requires a new way of coaching agents

March 22, 2021
Self-insurance, blanket coverage or CPI: Which is better for your auto loan portfolio?

Self-insurance, blanket coverage or CPI: Which is better for your auto loan portfolio?

March 3, 2021

About

ABOUT US

PRIVACY TERMS

ADA COMPLIANCE

CODE OF JOURNALISM ETHICS

Contact Us

ADVERTISE

HELP CENTER

EMAIL SIGN UP 

Follow Us

twitter twitter linkedin podcast

©2021 Royal Media & Auto Finance News

No Result
View All Result
  • Home
  • News
    • All News
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Compliance & Regs
    • Risk Management
    • Capital & Funding
    • Powersports
  • Events
    • DEMOvation Challenge 2021
    • Auto Finance Risk Summit
    • Auto Finance Summit
    • Auto Finance Innovation Summit
  • Excellence
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest
    • Magazine Issues
  • Podcast
  • Data
    • Lender Ranking
    • Fixed Rate Outstandings
    • Securitizations
    • Market Share Monitor
  • +PLUS
  • SUBSCRIBE
  • Log In / Account

© 2020 Royal Media

Go to mobile version