Affordability No.1 Challenge for Car Buyers in 2023, Cox Says

Cox Automotive’s recent list of “10 Predictions for 2023” includes mostly ongoing trends that are already present as 2022 ends, but which likely will kick in more strongly as the new year progresses.

The prediction with the biggest practical effect on dealerships: Affordability replaces availability as the greatest challenge facing vehicle buyers.

“Affordability could really be a major issue, if we have a full-blown recession next year,” Charlie Chesbrough (pictured, below left), senior economist for Atlanta-based Cox Automotive, says in a webinar sponsored by the American International Automobile Dealers Assn.

However, while availability is still tight, it’s improving. Automakers are gradually solving the computer-chip shortage and other supply-chain issues.

Charlie Chesbrough_2 (002)_5

The underlying factors behind the 2023 predictions include rising interest rates and affordability problems; worries about the U.S. economy in general; better new-vehicle availability; and growing, mass adoption of electric vehicles.

Here’s the entire list:

1. A slow-growing economy will place pressure on the automotive market.

2. New-vehicle inventory levels will continue to increase.

3. Total retail vehicle sales will fall in 2023 as new-vehicle sales grow and used sales decline.

4. Sales of electric vehicles in the U.S. will surpass 1 million units for the first time.

5. Used-vehicle values will see above-normal depreciation for a second straight year.

6. Vehicle affordability will be the greatest challenge facing vehicle buyers.

7. All-cash deals will increase to levels not seen in decades.

8. Dealership service operations volume and revenue climb.

9. Half of vehicle buyers will engage with digital retailing tools.

10. Federal incentives will encourage more fleet buyers to consider electrified solutions.

Cox Automotive produced a similar list a year ago. During an earlier  webinar, Cox Chief Economist Jonathan Smoke gave his team a B-minus for last year’s list. The biggest miss was a prediction that lease demand would improve in 2022. That hasn’t happened, as automakers have held back lease incentives.

Smoke also takes points off for last year’s predictions that “Vehicle demand will remain robust” and “Tight vehicle supply will gradually improve.” Demand has mostly remained strong this year, and vehicle supply ultimately has improved, but in both cases, not as strongly as Cox predicted.