By Gary S. Vasilash

According to the most-recent numbers from Kelley Blue Book, the average transaction price paid for a vehicle in May 2023 was $48,528. And this is even though, KBB found, the average price paid was $410 below sticker, not some wild figure well above it, which people were paying as a result of the pandemic: KBB notes that in May 2022 the price paid was $637 above sticker.

S&P Global Mobility reports that account-level delinquency rates of auto loads 60+ days past due are now up 26 basis points from Q1 2021, from 1.43% to 1.69%.

While that is a non-trivial jump, the folks at TransUnion and S&P Global Mobility point out that this is a situation that is being faced by a segment of the consumers and lenders, those who are in the subprime category and more than likely to be buying a used car.

So since that $48,528 MSRP may not apply to those people, know that according to Cox Automotive, the average used vehicle listing price in May was $27,256, “the highest since early January.”

Meaning, new or used, vehicle are pricy.

But this statement related to the loan delinquencies is somewhat startling:

“The interest rate rise is squeezing the monthly budget for the average American consumer. Consumers set aside money monthly for housing, vehicles, and insurance, but may not pay other obligations with the same frequency, such as medical bills and credit cards. People need their vehicles to get to work to make money and pay their obligations.”–Jill Louden, product management associate director for S&P Global Mobility

Something of a vicious cycle: buy a car, go into debt, use the car to go to work, pay for the vehicle and other things, but rack up even more debt for things like health care and presumably things like food.

If some company comes to market with appealing vehicles that have a low price—and this might be a Chinese company, 25% tariff notwithstanding—then this industry could be upended.

Presumably there is a considerable percentage of people who use their vehicles strictly for transportation and not as a signifier of their wealth or coolness. If the vehicle can do the job and do so reliably–without seeming like vehicular penance–then being able to acquire such a vehicle would be the way to go.

Let’s face it: not everyone—even those who are well above subprime—can afford an electric vehicle, which Kelley Blue Book found had an average transaction price of $55,488 in May—down 14% compared to May 2022, but probably because of Elon Musk adjusting the prices of his cars in a way that is completely uncharacteristic of traditional OEMs, so probably not something that can be counted on going forward.

Everyone talks about the transition to EVs and OEMs are tripping over one another to make this change to their showrooms.

But consider: How many people will be left by the side of the proverbial road by OEMs those consumers could once count on for reliable, affordable vehicles?