Rising used-vehicle prices, recovering supply and low delinquencies point to improving health for the auto industry.
The Manheim Used-Vehicle Value Index for mid-January sat at 162.3, a 0.7% increase from December 2020 and a year-over-year increase of 14.6%.
All major segments saw price increases, but luxury cars and pickup trucks continue to lead the market.
Inventory also improved, with used-retail supply sitting above normal levels at 51 days, and used-wholesale supply increasing to 25 days compared to the industry norm of 23, according to vAuto data.
Auto lenders are capitalizing on positive industry trends. Following months of tightened underwriting, financiers loosened their credit standards from September through December, according to Manheim’s Dealertrack Auto Credit Index. To be fair, credit remains tighter than February and from the same period a year ago.
Meanwhile, loan performance remains better compared to 2019, even as lenders prepare for an increase in delinquencies as accommodation programs end. In December 2020, 1.4% of auto loans were considered severely delinquent, an increase of 9 bps from the previous month. However, the rate of 60-day delinquencies decreased 22% YoY.
The number of auto loans in assistance programs declined to 2.8% as of Dec. 29, 2020, from 3.1% on Nov. 30, 2020, according to Equifax.
Still, consumer sentiment in January decreased 1.9% from December to 79.2, given high vehicle prices, rising COVID-19 cases and uncertainty about the future, according to the University of Michigan. The Michigan Sentiment Index has declined 21.6% from February 2020.
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