Philly-area car shoppers have more choices now, but interest rates are a challenge

After five years with her 2019 Volkswagen Atlas, Hope Thomas faced a big decision: drop four figures on inspection repairs or find a new car before the inspection expired in two weeks.

She’d grown weary of the SUV’s thousand-plus-dollar repair bills and 20 mpg. She wanted something more economical for commuting to her job as a hairstylist at Balance Hair Spa in Exton from her home near Reading. Yet it still had to offer three rows to accommodate her two dogs and supplies for work and her side gig teaching ballet, tap, jazz, and lyrical dance at Lionville School of Dance.

Thomas did her car-buying homework and was pleased to see more vehicles available than there were at the height of the pandemic when car inventory plummeted because of supply chain issues compounded by a shortage of computer chips.

“I felt like there was more inventory out than there was a couple years ago for sure,” Thomas said. “Because I’m always scrolling and perusing, and am just like, ‘What if something blows up in my face? What would I buy tomorrow?’”

Interest rates pushed her from shopping for a used car into something new. She ultimately bought a 2024 Kia Sorento Hybrid from Savage Kia in Reading, paying about $42,000 for the vehicle on May 1.

Thomas’ story is emblematic of the state of car sales in the Philadelphia region today: People are finding more inventory online and on dealer lots, though better deals, and perhaps sales numbers, are being sacrificed because of higher interest rates on car loans.

That’s echoed nationwide. Automotive industry watcher Cox Automotive reports 2024 is expected to beat 2023 in sales but with no real home runs.

Inventory is “definitely manufacturer dependent, but it is definitely increasing,” said Dominic Conicelli, president of Conicelli Autoplex, which has six dealerships in the Philadelphia region and sells Toyota, Honda, Hyundai, Genesis, and Nissan. “Some, we have more stock than others; it’s definitely on the way up across the board.”

Conicelli said inventory at his five dealerships in Conshohocken and one in Springfield, Delaware County, remains less than 2019 levels. He said he probably has 30 or 35 days’ supply of Toyotas and Hondas, while for other automakers, it’s up to 50 days.

“I think 60 would be the spot where I would start to feel overloaded,” Conicelli said, a number he said he was consistently above before the pandemic.

Conicelli cautioned that these numbers are specific to his high-volume dealership. They are low by industry standards. Cox Automotive reported that supply is up through the industry, with the average at 76 days in the United States.

At the lowest point during the 2022 computer chip shortage, “days’ supply” wasn’t even a thing.

“We were presold,” Conicelli said. “We were selling into the future and pretty much had nothing on the ground available.”

Sales in the Philadelphia designated market area — which includes parts of Pennsylvania, New Jersey, and Delaware — have bounced back from the low point in 2022, according to Kevin Mazzucola, executive director of the Auto Dealers Association of Greater Philadelphia.

Vehicle sales went from 353,000 in 2021 to a low of 286,000 in 2022, and back to 308,000 in 2023, Mazzucola said.

“That decline was really centered on inventory,” Mazzucola said.

Those numbers track with data and predictions for the U.S. from AutoForecast Solutions in Chester Springs. Vice president Sam Fiorani said strength in the market pushed the forecast for 2024 up to just over 16 million vehicles sold.

The average before the pandemic was about 17 million vehicles, but it fell to closer to 15 million at its lowest point.

Fiorani said that supply is starting to build across the country, probably more so than in the Philly region. He cited many dealers around the country reporting more than a 60 days’ supply of vehicles.

“More and more dealers are loading up with inventory,” Fiorani said. “Nationwide we’re back at levels that are pre-COVID.”

Interest rates can be a struggle for consumers. Long accustomed to low-single-digit APRs for auto loans, rates are now nearing or exceeding 10% for many customers.

“I think you’re also seeing a very resilient consumer, but at least currently they’re able to absorb that monthly payment increase,” Mazzucola said.

On the bright side, Santa Monica auto watcher Edmunds.com reports that average transaction prices have ticked down a bit, from $48,056 at the end of 2023 to $46,992 in the first quarter of 2024.

Mazzucola says that as inventory rises, dealers have been more willing to offer incentives to make a sale.

“They’re having to discount these vehicles more because there are more vehicles on the lot,” he said.

Another factor keeping sales up may be that many consumers’ vehicles are coming to the end of their useful lives. Edmunds reports trade-in ages for new and used vehicle purchases are on the rise.

The car review and deal site reports that the average age of vehicles traded for new car purchases in the first quarter of 2024 was 6.1 years, almost matching 2019′s 6.3. For used cars, average trade-in ages were 9.4 and 9.5 years, respectively.

S&P Global Mobility notes that in its recent survey of U.S. average vehicle age, the number has risen by two months, to a new record of 12.6 years in 2024.

Another change in the market is the push for electrification. After a banner year for EV sales in 2023, analysts such as Fiorani see a challenge in keeping the vehicles’ sales strong now that the new technology’s early adopters are sated.

As an example, Ford’s website shows bargains for the 2023 and 2024 all-electric Ford Lightning pickup. A trip to Cars.com shows bargains are also great on used EVs.

Shoppers are showing more willingness to consider hybrids and plug-ins. Toyota, in particular, has capitalized on this market, as it’s been synonymous with the Prius line of cars for years. Its all-hybrid Sienna minivan remains available mostly to order.

Mazzucola pointed to rising hybrid sales at Ford and Hyundai, and noted that 51% of all Accords are hybrids.

“Consumers like electrification, but only to a point,” he said.

Thomas, the hairstylist with the new Sorento Hybrid, is happy to be among them. No longer does she have to leave her SUV behind and take her husband’s Jetta to work to save on fuel. But she demurred on a plug-in version, saying she didn’t feel ready for one just yet.

Mostly, she’s happy she was able to find what she wanted — plus the 40 mpg in her hybrid SUV — and notes how different it was for a colleague shopping in 2022.

“She was like, ‘This is the worst; I can’t find anything I want,’” Thomas recalls. “‘I can’t find the model, let alone the aesthetic stuff, like the color and whatever.’”

Now, the consumer has some choice again.

“I didn’t feel like I was boxed in,” Thomas said of her shopping experience at a dealership in Coatesville and one near her home. “Two dealerships had at least four vehicles that fit.”