(NewsNation) — Auto sales remain near the lowest pace of sales for the year despite improvements in the supply chain, Cox Automotive reported Wednesday.
According to the Atlanta-based automotive dealer solution company, the auto market is poised to restock supply back to pre-pandemic levels, but interest rate hikes from the Fed have thwarted such efforts.
Cox Automotive’s research indicates that loan rates in both the new and used vehicle market at the end of the third quarter only went up by 2%.
A big reason cars aren’t selling comes down to financing: The Federal Reserve raised interest rates to the highest level in 14 years, and they’re in talks to continue raising the rates into 2023, making it hard for Americans to get loans.
The Fed’s fight against inflation comes as the auto industry’s inventory levels are finally rising from record lows.
Data from the American investment banking division of Bank of America, BofA Securities, as reported by CNBC Friday, show that the total automotive inventory increased to about 1.43 million units at the end of September — the highest level since May 2021 and up 160,000 units from the end of August.
The matter is concerning for auto industry professionals, as they had expected pent-up demand from the pandemic to persist.
“New cars may finally become more available just when most Americans can no longer afford them, and that does not bode well for a supplier base already on the ropes from three years of low new-vehicle sales,” Cox Automotive Chief Economist Jonathan Smoke wrote in a blog post Wednesday.
Another issue has been rising costs, as automakers have been pushing their most expensive lines to compensate for the lack of sales.
Referencing data from Edmunds — a car research site — CNBC reported that the average amount financed for a new car was $41,347 during the third quarter, up from $40,602 during the second quarter and $38,315 a year earlier.
“Inventory can be a bit tenuous, but it feels like maybe it’s going to get better and not necessarily worse, which comes at an interesting time, because now it feels like there may actually be a bit of trouble on the demand because of higher prices, higher interest rates and the questions of whether we’re in a recession or not,” said Jessica Caldwell, executive director of insights at Edmunds, speaking to CNBC Friday.