We’ve all read the headlines about the automotive industry’s suffering lately—particularly at the tail end of 2022—but are consumers still buying cars in 2023?
In recent months, consumer habits have shifted from cost-conscious spending to greater discretionary spending. Now, we’re wondering if this shift in consumer spending habits extends to more expensive purchases, like cars, and long-term financial commitments, like auto loans. In times of economic uncertainty, it is common for consumers to cut back on large purchases, allocating funds to essentials and savings instead. However, as post-pandemic economic pressures like record-high interest rates persist, are consumers still concerned about their financial circumstances, or will increased discretionary spending pave the way for more high-ticket auto purchases this year?
Foot Traffic to Dealerships & More
In our foot traffic analysis, we compared consumer foot traffic to automotive locations in Q1 2023 with foot traffic to the same locations in Q1 2022. Overall, the Automobile category saw an increase in year-over-year foot traffic of 18%.
Within this category, all groups experienced growth in foot traffic. However, auto parts stores and auto repair locations didn’t see the same level of growth as dealerships saw. Both new and used car dealerships experienced substantial growth in foot traffic in Q1. New car dealerships saw an increase in year-over-year foot traffic of 21%, and used car dealerships were at 28%. Motorcycle sales destinations also saw an increase in foot traffic of 8% year-over-year. With this level of growth, it seems consumers are prioritizing purchasing new automobiles rather than repairing the ones they already own.
Our foot traffic data shows that consumers are once again shopping for vehicles and feeling more confident in making larger purchases than they did at this time last year. However, because economic uncertainty continues, will these automotive industry trends last?
The Auto Industry Today
While automakers are expected to sell 14 million new vehicles in 2023—a great improvement from the years prior—concerns over the health of the auto industry remain.
Folks continue to visit dealerships and make purchases, but the number of monthly auto loan payments over $1,000 is growing. Moreover, higher interest rates are causing record-high defaults and pressuring lenders. It seems that consumers these days are taking on heavier financial commitments with greater risk. At the same time, many automakers continue to face supply chain challenges and material shortages. With the auto industry in a decidedly rocky place, will foot traffic to car dealerships continue to rise despite these challenges?
Although the industry’s current challenges are highly unfavorable, fleet sales, consumer interest, and incentives may make for some level of recovery later this year.
Buying Cars in 2023
2022 was a challenging year for consumers and the auto industry alike. The pressures that lenders, automakers, and dealerships faced mirrored the pressures that consumers were facing. Housing costs rose, food costs soared, and inflation was felt all around. 2022 was bleak for many in the automotive industry, but now, as consumer habits shift, things appear to be taking a turn for the better.
Car sales are projected to continue growing this year, and along with other predictions for the industry, cash sales numbers and new inventory will likely increase. The used car market will likely continue to face supply and demand imbalances, but with prices potentially falling and incentives increasing, the automotive industry may do some recovering from the previous years as consumers continue buying cars in 2023. While the automotive industry probably won’t fully rebound to pre-pandemic levels of sales and foot traffic, 2023 may indeed be a step in the right direction.
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