Auto Loans Lengthen While Dealers Fear 84-Month Terms and Negative Equity
Consumers took out longer vehicle loans in the second quarter, with a record 24 percent choosing 84-month terms or longer, fueling dealer concerns about customers bearing negative equity or being sidelined from making a purchase in the future. New-vehicle borrowers in the second quarter took out loans averaging 70.4 months, up 0.6 months from a year earlier, according to Edmunds. Used-vehicle borrowers agreed to an average term of 70.1 months, up 0.4 months from a year earlier, reports Automotive News. Experian said that for the first quarter, its most recent data, nearly 36 percent of new-vehicle loans ran longer than 72 months, up about 5 points from a year earlier. Almost 32 percent of used-vehicle loans in the first quarter ran longer than 72 months, up nearly 3 points from a year earlier. “The 72, 84 months is definitely happening a lot more than it used to,” said Nicole Lacy, business manager of RC Lacy Ford-Subaru in Catskill, N.Y. Longer loans highlight consumer affordability issues and raise concerns at dealerships over negative equity, in which borrowers owe more than the vehicles are worth, and slower sales cycles. Click here for the full story.
EV Batteries Are Defying Expectations After Hundreds of Thousands of Miles
Richard Symons recently took his five-year-old Tesla Model 3 on a 260-mile road trip across England without having to stop for a charge. A new electric vehicle could make the trip no-problem. But Symons’s car — which he has affectionately nicknamed “Miles”— has logged 247,000 miles and is still up for frequent long-distance drives.Symons, the owner of a U.K.-based used-car sales company that specializes in EVs, has found that the batteries that power these cars continue to perform well even after several hundred thousand miles. This has come as a welcome surprise to him and other EV enthusiasts, reports The Wall Street Journal.“They are proving themselves to be exceptionally reliable,” Symons said. After five years on the road, the average EV will still be able to drive up to 95 percent of its original range, according to Recurrent, a data-science company that provides a battery-monitoring tool for EVs — better than many in the auto industry expected. Consumers in the mass market have yet to develop trust in EV batteries, according to Jessica Caldwell, head of insights at car-shopping resource Edmunds. “There still is a lot of trepidation amongst buyers,” she said. Click here for the full story.
Pricing Negotiations Drive Decline in June Car-Buying Satisfaction, CDK Finds
Consumer sentiment weighed heavily on the car-buying experience in June, according to CDK’s latest Ease of Purchase Scorecard. The overall Ease of Purchase score fell to 80 percent from 87 percent in May, although it remained above last June’s 77 percent, reports CBT News. While inventory availability and transaction speed improved, buyers reported growing frustration when negotiating prices and trade-in values. Consumers continued to complete their purchases in person despite the growth of digital retailing. In June, 77 percent of buyers completed the entire transaction at the dealership, the highest percentage CDK has recorded since launching the scorecard four years ago. Vehicle availability also improved, with 55 percent of buyers purchasing a vehicle that was in stock, up from 48 percent in May, 51 percent a year ago, and the 2025 average of 50 percent. CDK noted that higher in-stock availability has historically contributed to stronger Ease of Purchase scores. On the other hand, negotiating the final vehicle price and trade-in value proved to be the largest obstacles for buyers. Satisfaction with both measures fell eight percentage points from May, even though both remained higher than last June. Click here for the full story.
Automakers Want to Kill AM Radio, But Government Could Force Them to Keep It
U.S. lawmakers want to make sure that car companies are forced to give you the oldest infotainment technology around. No, not talking to the person beside you to keep you busy on a long drive or “eye-spy,” this is about AM radio. The hazy side of your radio dial that’s now limited to mostly talk and sports but even then, is fading out. Car companies don’t want it, and they say that demanding it will add nearly $100 to the price of a vehicle, reports Carbuzz. The first commercial AM radio broadcasts were in 1920, and the first in-car accessory radios showed up in the 1930s. Now, thanks to electric vehicles, the in-car AM radio is starting to go away. Automakers are dropping the technology in EVs because the electrical noise of the high voltage systems causes interference. The Alliance for Automotive Innovation, an industry trade group, said that it’s not possible to completely resolve the interference, and that a mandate would cost $3.8 billion over the next seven years. That’s potentially $360 for every EV, or $32 per vehicle for the entire market. Click here for the full story.
Bank of America’s Weekly Rates Market Update
U.S. June nonfarm payrolls rose just +57k (vs. +113k consensus), with net revisions to prior months of -74k. The unemployment rate fell to 4.2% from 4.3%, driven by lower labor force participation. BofA views the report as softer, but not sufficiently dovish to alter its expectation for further Fed tightening. The payroll shortfall was largely driven by leisure and hospitality (-61k), while downward revisions were concentrated in leisure and government employment, both affected by seasonal distortions. Education and healthcare remained strong (+69k). BofA believes the report reduces the likelihood of a July hike, giving the Fed additional time to assess incoming data. The softer payrolls report led markets to price a more gradual Fed tightening path, as investors pushed back expectations for the next rate hike to December. BofA continues to expect three 25bp rate hikes this year, beginning in September, citing a still-resilient labor market and persistent inflation pressures. Click here for the full report.
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