The Auto Market Brief

In this episode of The Auto Market Brief, host Erin Keating is joined by Cox Automotive Chief Economist Jeremy Robb to examine the latest Federal Reserve updates, wholesale market trends, and the economic forces helping support continued vehicle demand. They also explore several significant regulatory developments that could affect dealers, lenders, automakers, and consumers in the months ahead.

Fed Signals and Consumer Impact
Jeremy breaks down the Federal Reserve's latest rate decision, what surprised markets in the Fed's economic projections, and how policymakers continue balancing inflation concerns against a resilient economy. The discussion also explores how higher interest rates affect vehicle affordability and how perceptions of higher borrowing costs can affect vehicle purchase decisions.

Wholesale Market Trends and Diesel Price Pressures
The conversation also explores the wholesale market, where the latest Manheim Used Vehicle Value Index shows prices softening modestly year over year. Jeremy explains emerging depreciation patterns, including the outsized impact of one-year-old vehicles and how elevated fuel costs are influencing full-size trucks, SUVs, and diesel-powered vehicles across the market.

Financial Assets, Consumer Wealth and Market Resilience
New research on the growth of financial assets and the increasing role of the wealth effect in supporting consumer spending. The discussion highlights how rising asset values, retirement demographics, and changing buyer profiles may be helping explain the resilience of the automotive market despite affordability challenges and economic uncertainty.

The episode also covers new FTC pricing guidance for dealers, finalized IRS rules surrounding auto loan interest deductions, minimum advertised pricing developments, and the latest legislative effort to require AM radio in new vehicles.

The Auto Market Brief delivers timely data, clear context, and practical insight to help industry leaders make smarter decisions—what's happening now, and what's coming next. 

The Auto Market Brief is powered by Cox Automotive. For more industry insights and expert perspectives, visit our Insights Hub at Cox Automotive Insights.

Creators and Guests

Host
Erin Keating
Erin Keating is an Executive Analyst and Senior Director of Economic and Industry Insights at Cox Automotive. She brings 30 years of professional experience, including 14 years in the automotive industry, providing analysis on market conditions, automaker performance, and consumer demand shaping the economics of the new-vehicle market. Erin spent 10 years with Audi of America, including leading Audi Motorsport North America, informing her perspective on both commercial strategy and competitive dynamics.
Guest
Jeremy Robb
As chief economist at Cox Automotive, Jeremy Robb oversees the enterprise-level economic outlook, monthly forecasts, client advisory, media briefings and the strategic integration of data from the company’s extensive retail and wholesale platforms. Jeremy leads Cox Automotive's Economic and Industry Insights team, working directly with clients and executive leaders in sales, strategy and finance. He draws on his background helping companies consume data and insights to make better business decisions. He has been focused on finance and strategy for large corporations in the financial services and automotive industry for the past 20 years. Jeremy joined Cox Automotive in 2018 after spending 6 years at Nissan where he led functions in finance and remarketing.

What is The Auto Market Brief?

The Auto Market Brief, powered by Cox Automotive, breaks down the latest trends and forecasts shaping the automotive industry. The show is hosted by Cox Automotive Executive Analyst Erin Keating, coupling years of experience translating data and trends with the data and industry insights of the largest automotive services and technology provider.

Joined by other Cox Automotive experts and outside guests, you’ll get data-driven insights and industry outlooks from some of the industry’s leading voices.​

Erin Keating:

Welcome to the Auto Market Brief from Cox Automotive. Each episode, our experts and special guests break down the latest trends, insights, and news shaping the automotive market. We'll give you the information that truly matters so you can make smarter decisions and drive your business forward. Hello, and welcome back to The Auto Market Brief. I'm Erin Keating, your host and an industry executive analyst here at Cox Automotive.

Erin Keating:

And as usual, I've got our chief economist Jeremy Robb alongside me today. Hello, Jeremy.

Jeremy Robb:

Hey. Nice to see you today.

Erin Keating:

Good to see you too. Today, we're gonna check-in with Jeremy on diesel price impacts, some news about the latest Fed decision, which of course, the airing of this will be maybe a week and a half old, Manheim values. And we're actually gonna touch on something that Jeremy spoke to in our third quarter call last week, which is financial assets and how they are helping to bolster the economy. As for me, it's all regulatory fun today. A couple of interesting headlines last week about the FTC FAQs being released, some auto loan interest deductions being finalized with the IRS codes, and AM radio for all.

Erin Keating:

Can't believe that we're going back to that. I just wish we had some regulation around maybe making manual vehicles required. Right? Who doesn't want a stick shift? Come on, Jeremy.

Jeremy Robb:

Yeah. So, you know, we've continued to see gas prices move higher. The national average of a gallon of gas is pretty close to $4.50 which is pretty much where it peaked at back earlier this year in May. Definitely, you know, weighing on the consumer a little bit. The more interesting factor with gas is diesel, which has come up a lot in the news lately.

Jeremy Robb:

Diesel prices have hit a high daily, a new all time high daily for I think twelve days in a row until today. And they're down, I think, 0.004 of a penny. So they didn't hit

Erin Keating:

new Oh, You're really digging there Jeremy.

Jeremy Robb:

Didn't didn't move. Yeah. And it's a we all know, like, diesel has a big impact in the economy. I don't think that it's really impacted too much of our inflation expectations so far this year. But as it continues to stay really high and elevated and goes down that path, it's going to factor into a lot of inflation expectations.

Jeremy Robb:

And, you know, it moves automobiles, the food, trucking, so many things across the economy. I was just in a big meeting this morning, and people were bringing up like how important it is to things overall. So, impactful and really impactful in terms of implications for that. I think some of that is actually what, you know, started to feed into what the Fed did last week when they raised interest rates 25 basis points. And that was expected.

Jeremy Robb:

The market really expected an interest rate increase. Think people probably would have gone ballistic had they not raised rates. It was unanimous decision across the Fed. But one of the things they do quarterly, which they did in September, is they release this thing called the statement of economic projections or the SEP, people refer to it as, where they show their own, what they call the dot plot, where they think GDP growth is going to go, and employment and inflation and things like that. And they also show expectations of the Fed funds rate over the next several years.

Jeremy Robb:

And that dot plot gets factored into what a lot of the market participants think of as to future inflation impacts. You know, so they raised rates a quarter point in the September meeting. They've got two meetings left this year. But the dot plot said they were going to raise rates or they expected to raise rates one more time this year. And that took the market by surprise.

Jeremy Robb:

You know, I think a lot of people thought that was a possibility or probability, But it factored into to that too. And we've seen interest rates ebb and flow off the tenure being around 5% over the past week or so. Today, it has kicked up pretty, pretty solidly over 5%. For kind of the first time, we got some more economic data that was a little bit more positive suggesting that growth may be better. So the Fed hiking into a high growth rate when they're trying where they're really they're trying to slow the economy down, like enough to get inflation under wraps.

Jeremy Robb:

And so that's a lot of what's moving the needle. That the interesting thing for cars and for the automotive industry, if you if you increase rates 25 basis points and that was passed along to the new car consumer, it would only increase your monthly payment by $5.50.

Erin Keating:

Right.

Jeremy Robb:

It's the Fed increased interest rates at full psychology.

Erin Keating:

Yeah. Psychology. Right. It's

Jeremy Robb:

one more thing that's compounding all of these things that are impacting consumers this year. So pretty, you know, that's kind of where the Fed is and stuck between a rock and a hard place, right? You don't have great growth, but you've got some positive growth. But I think, you know, one of the things they talked about is just financial is there financial, you know, are they being stimulative or restrictive financially? And conditions don't suggest that there's really a lot of, you know, restrictive pieces out there.

Jeremy Robb:

So, we'll see what happens as this gets further pushed into the economy over the next six months or so.

Erin Keating:

Yeah. Well, and so, I mean, of course, we talked about diesel at the upfront, but I think you've got some news for us on how that's even maybe impacting some Manheim values. So why don't we shift over to the wholesale market and tell us what's happening there?

Jeremy Robb:

Yeah. We recently released our mid month movie or Manheim Used Vehicle Value Index. We saw prices decline and prices now are down by 40 basis points or 0.4% year over year. And it's pretty interesting to me. I do a lot of modeling of depreciation trends throughout the year.

Jeremy Robb:

The movie is a seasonally adjusted index. They keep the weighting of vehicles. It only moves over a twenty four month rolling basis, so it's not you don't see everything that's actually happening. And so, like for me, when I look at the movie against like what we're actually seeing at the auction, sometimes you get a little bit of a disconnect between the two. And I've been trying to been in a lot of like planning sessions for business and our company itself over the next year or so lately.

Jeremy Robb:

And so looking into that, one of the things, or two things, really. One is that we've been seeing depreciation trends in one year old vehicles be a little bit stronger than normal or what we normally see. And that's more interesting because when you see the one year old moving, it's a lot of times because incentives on vehicles are changing. And if new car incentives are rising, that definitely impacts one year old vehicles a lot. But we new car incentives are down year over year.

Jeremy Robb:

So that's really not the culprit. But we are seeing some mix changes that are happening in terms of the one year old. The one year old vehicle, if you think about a price waterfall of prices, the new car price is the highest, the one year old should be the second highest, so on and so forth. The one year old is typically a fairly high dollar amount car. So if it is depreciating, it can pull down the total a little bit more, because it's a higher dollar vehicle out there.

Jeremy Robb:

So that's one factor, if you want to like, like inside baseball, what's going on in vehicle prices. The other one is related to fuel prices, which is probably pretty obvious to people. But I've got a I've got a caveat with the diesel thing. So we've seen full size pickup trucks and SUVs declining a little bit more than the rest of the market over most of the summer, because of high gas prices. But through some of our new found AI tools, I was able to dig into what's happening with diesel prices.

Jeremy Robb:

Our our vehicles that are, like, diesel powered, the depreciation rates over since, like, June, July, through, like, last week on diesel vehicles has been somewhere between like 310% higher than than gas powered same vehicles. I'm curious how you think about that

Erin Keating:

as far as commercial, right? Because most commercial vehicles are diesel, at least once you get into, like, class four to eight. Right? Although we do have some new technology that's coming on the forefront. We do have some hydrogen fuel, you know, large vehicles class through four through eight.

Erin Keating:

Some EV, not many, and those are obviously, you know, gonna take time. But I'm curious if this opens. We always talk about the aperture opening from gas prices for light vehicles for consumers. Do you foresee that, like, if over the long haul, diesel prices actually continue to impact appreciation value on vehicles that are diesel powered, like, could that could that be an impetus for the commercial market to sort of pick up speed as far as finding alternative powertrains for, you know, again, class four through eight? Right?

Erin Keating:

Is it that big of a deal that for those that own those assets?

Jeremy Robb:

I think it could, you know, I mean, people that are using diesel, they're gonna pass that price long right now. Can't absorb it anymore. So it's got a heard a really interesting story I won't go into this morning, but about farmers in Montana on Marketplace or something, you know, it's like just wild stories, but the diesel inventory supply, whatever you want to call it at Manheim, pretty small, relative to the total. So three or 4%, maybe 2% sometimes. It's not, it's like mid single digits or low single digit numbers.

Jeremy Robb:

So it's not like huge, you know, and, you know, auctions are markets. Price comes down 10%, 15%, somebody's gonna, somebody's pretty interested in that, even though operating costs are high, because they probably think, well, the operating costs have a good chance of coming down. But, you know, are people going to change and be trying to find a substitute for something that could haul products that is not powered by diesel, sure. You know, we just need to see whatever that is be more of an option out there.

Erin Keating:

Yeah. Maybe something to investigate with Zoe and friends over there in the the fleet space at a later time when we start to see what are the shifts really happening in the commercial space. Well, certainly, that's lot to think about. Yeah, I'm sure. Go ahead.

Jeremy Robb:

Yeah. Jeremy Robb I was just gonna say like, it's a good segment and all you know, all of these things we're going to do in the Q3 call that'll be out. Zoe's got his own segment there too. So anybody that's more focused on that part of it. Definitely seek out that piece of it.

Erin Keating:

Absolutely. And speaking of third quarter calls, which by this point of airing will have already been out last week, why don't you take us through maybe a snapshot because they'll get the full Monty, if you will, during the third quarter call. But I know you wanna talk about the growth of financial assets and and how that might be impacting and bolstering the economy.

Jeremy Robb:

Yeah, so we I do definitely. And I've been talking about a lot. But we, you know, we talk a lot about the wealth effect. The fact of the matter is there's not really a lot of great information out there. I have been researching to try to find it that really puts into perspective how strong the wealth effect really is.

Jeremy Robb:

And over the last month or so, I have found some new data from the Fed, that's called the distributional financial accounts that really puts out all different kinds of assets, including financial assets, and the growth of those over the last thirty something years, quarterly, but breaks it into different wealth percentiles. And so it includes things like deposits and savings and money market accounts and debt securities, if you hold like treasuries, if you know, kind of park your money there. It includes four zero one ks assets and things like that. They define them as defined benefit and defined contribution. But the great thing is that all of these things are their own category.

Jeremy Robb:

And they also include a category called corporate securities and mutual funds, which are basically financial assets and stocks held outside of your four zero one ks and pension accounts. And so what I have done is compiled all of that information, excluding four zero one ks accounts, and looked at the growth of it over the past thirty five years, and the trajectories of that growth. And when you think about mutual funds or treasuries or, you know, if you own stocks, that stuff's pretty liquid, you can sell it, you know, like most people don't own these really esoteric assets that are hard to sell. And so I consider most of that stuff pretty easily turned into cash if you need it. So you think about it as they're more liquid.

Jeremy Robb:

The top 10% of all wealth has since the 1990s, the top 10% of wealthy people have owned 70% of it. As of the Q2 data, came out a week ago or less, they own 82% of it. So it's moved up higher, but it's always been really high. But the fact of the matter is, it's like everybody has seen their assets grow quite a bit. Over the past five years, the bottom 50% has seen theirs grow by 4.5% on average every year.

Jeremy Robb:

Your 50 to ninetieth percentile bucket has seen their assets grow 7.7%, but the top 10% has seen theirs grow 11.3%.

Erin Keating:

So,

Jeremy Robb:

and the top 10% owns so much of stocks and, you know, that group of stocks outside of your four zero one ks assets. What they also own, and a lot of people own though, are money markets. When the Fed started raising rates back in 2022 and 2023, we had several generations of people that were never able to put their money into something that would give them four or 5% return. And the reason I call that out is because even if you have a stock market correction, which would take down the growth of financial assets, and probably impact consumer spending, you've got this really big buffer of the growth in money market accounts. It's just pretty interesting stuff.

Jeremy Robb:

I'm going to do more deep dives into it and share it with more people. I've just started to share it with people, but it really helps us think about we are likely in an economy with an aging population, and a more wealthy population that is much more tied to growth in assets and financial assets than incomes. Right? And these kind of viewpoints help to illustrate the differences in And

Erin Keating:

we are seeing, you know, even the age distribution change for those that are purchasing new vehicles, especially, right, have have tended to veer towards that age group too, the wealthier, you know, baby boomers and older Gen Xers that have that exact type of investment vehicle that you're talking about. Yeah.

Jeremy Robb:

Yes. Every category of consumer from, I think, 44 years of age and younger, have been declining over the past six years. The 75 older group is rising. The 66 74 group is rising. So a lot of people retiring, you know, we know that.

Jeremy Robb:

They retire, they have more money, they want to buy their last new car. And that's what they're doing. So, you know, they're they're helping the new car market.

Erin Keating:

Absolutely. Well, I know this is a lot that we just covered there. And again, just as a reminder, some of this stuff was actually covered in our third quarter call that would have been released last week. So by all means, please make sure that you're tuning into this. But thanks, Jeremy.

Erin Keating:

It's a lot to digest. And as usual, just a lot of really interesting corners of the market that we need to understand that continue to help create that nuanced, you know, thinking around why we keep selling vehicles.

Jeremy Robb:

Yeah, that's exactly, I mean, my theme in our call is that, you know, the automobile market is resilient. And what I'm trying to paint the picture of is why is it resilient out there? And I need to socialize this stuff a lot with people because it can get complicated, but it's super meaningful and impactful too. Great to talk about. Yeah.

Erin Keating:

Well, thanks for being here, Jeremy. We appreciate you as always, and I look forward to coming back in two weeks and seeing what else has changed. Because as we find out

Jeremy Robb:

See you next time.

Erin Keating:

Surprisingly, we have a lot more stuff to talk about. Yep. Take care. So that was a good wrap on the ever changing nuances behind how we think about the car industry and especially how are we continuing to function at pretty resilient levels regardless of how it might sound from a consumer sentiment perspective. What I'm gonna talk about today is a couple of regulatory topics that have all been in the works, but for which we now have some clarity.

Erin Keating:

And I always love getting into the details of regulations because they really do have a pretty deep impact on our business. So for one, the FTC finally released their FAQs as a follow-up to the price transparency action that they took against the 97 dealers. And then secondly, almost a year later, we have the IRS having qualifies for the deduction on the auto loan interest. And finally, some legislation that at least passed the congress to require AM radios in vehicles. So let's start with the FTC FAQs.

Erin Keating:

The interesting thing about this that I think is most important is that it was clear that the FTC is focusing a little bit more narrowly than maybe was expected. The agency is not trying to resurrect the original vehicle shopping rule, which was part of that Cars Act that was put into play and then taken back out. Rather, it's saying that anything a customer must pay to complete the transaction belongs in the advertised price aside from government required charges such as taxes and registration. The real useful distinction that came about is that we're talking about the difference between dealer installed and required versus dealer installed and optional. So if a dealer installs an item and requires a customer to buy it, that cost belongs in the advertised price.

Erin Keating:

If it's genuinely optional, even if it's already installed, the customer must be able to decline it and therefore the ad could potentially leave that out. But it has to imply specifically what's required versus what's optional and can be declined. So the same logic applies to mandatory fees and discounts that not every buyer can actually get. And for dealers, this is really important, not just because it's, you know, important for customer transparency, etcetera, But this is really an operating issue, really not just because it's it's not just talking about advertising. Right?

Erin Keating:

Inventory feeds, websites, digital retail tools, third party listings, and the final deal worksheet all need to land on the same number. If one system subtracts a conditional rebate while another one adds a required fee later, that compliance risk is where the real risk is. It's in that handoff. So given all the goings on at the FTC, one piece of interesting news that came up and is fun to contemplate was that Stellantis of all brands will join General Motors, Toyota, Hyundai, Kia and some others in enforcing minimum advertised pricing, preventing dealers from publicly promoting their deepest discounts on new vehicles. This isn't necessarily a new practice.

Erin Keating:

It's a generally sound practice, but it lands a little differently when a brand like Stellantis has been recently heavily discounting at more than three times the industry average. If the playing field truly levels out, I think it only reinforces why the dealership matters. Right? Is is the dealer where you're going to get the best price? However, something for all of us to think about is, what does the consumer think about that?

Erin Keating:

Do the shoppers really appreciate cleaner advertising pricing or simply trust less when they have to show up at the dealership to really get the real deal. Right? So, yes, they wanna see the transparent pricing. But if they can only find their best deal once they go into the dealership, then are we still accomplishing the consumer desires like we hope to? So again, this isn't new, but in an FTC compliant world, it will be interesting to watch.

Erin Keating:

Keeping in mind, remember that we've also heard stories about Carvana who recently purchased six Stellantis dealerships and how they've actually proven that when you actually keep a frictionless process with nonnegotiable pricing, you actually can make the sale at a higher cost. So all of this really interesting when it comes to this, you know, making sense of the price, especially when you've got consumers who are price sensitive. The second thing that came out, and we've heard about this for a year, but no one's really been discussing it lately, but the IRS did finally finalize all of the rules, is around the auto loan interest deduction. So this came out of the one big beautiful bill, and it was heavily lauded as, oh, this is going to be great for affordability, up to $10,000 a year. From 2025 to 2028, taxpayers are able to actually deduct the interest on their auto loan.

Erin Keating:

There were a lot of caveats that we already knew about. So it only qualifies for new vehicles. They have to be US assembled, they have to be bought for personal use. And it doesn't apply to used cars, which actually disappointed quite a few lawmakers who were hoping that that would be the case. And it doesn't apply to leases.

Erin Keating:

The problem is it starts phasing out after a $100,000 of income for single filers and 200,000 for joint filers. So yes, it's an affordability lever. But let's not confuse a deduction with a discount. If you think about it, even the full $10,000 deduction is worth roughly $2,200 to someone in the 22% tax bracket. But most payers are not paying anywhere near $10,000 in interest in a single year, or at least we hope they are not.

Erin Keating:

So a more realistic $3,000 of qualifying interest still only saves people about $660 that first year. So not exactly a monthly payment miracle. The dealer point is pretty simple though. Explain the benefit accurately and do not sell it as a guaranteed savings. The thing that we're paying attention to is that even though there is a modest customer benefit for some, this really comes with another administrative burden for dealers.

Erin Keating:

It's more data to capture, more eligibility questions to answer, and more time spent making sure that the paperwork is right, all of which adds cost to the transaction. Matters. Lenders and other interest recipients generally must report when they receive at least $600 of qualifying interest. So they need the clean VIN number. They need loan and eligibility data, etcetera, etcetera, to make sure that this is all handled with compliance.

Erin Keating:

So one thing in and another thing adds to it. Right? The third thing that was interesting was that the house passed the AM radio for every vehicle act by voice vote on September 15. But it is not law yet, of course, because the senate still has to act and the president would need to sign it. If it is enacted, new passenger vehicles would eventually have to include AM reception as standard equipment at no added charge.

Erin Keating:

The argument, of course, is public safety. AM travels far and can keep working when cell service or Internet access does not, especially in rural areas enduring disasters. Fair enough. But we are also talking about Congress regulating a dashboard feature because some automakers, particularly with EVs, have decided the interference and engineering costs are not worth it. So, yes, it's a reasonable thing that we should have some form of communication that will reach all citizens in cases of emergency and such.

Erin Keating:

But to that end, I'd argue, do we need to regulate people carrying around boom boxes? I mean, this is just the car where we're talking about. So again, for dealers, the near term lift is pretty light. Just know what the vehicle has. And if the bill becomes law, handle the transition disclosures.

Erin Keating:

For automakers, it's a little more serious. It's another small product decision that could become a federal requirement and with real design work and cost attached. If we pull all these headlines together, the remarkable part is how consistently this industry keeps up. We always talk about how the dealers are so resilient. Well, the industry itself is really resilient.

Erin Keating:

Dealers, lenders, and automakers absorb these pricing interpretations. You know, one more tax program, one more reporting requirement, one more product mandate. Then they have to update the systems. They have to train their people. They have to keep selling cars.

Erin Keating:

The harder question here is is how much of this material changes the consumer outcome, right? We absolutely need a regulatory environment that protects consumers and society, but every layer carries a cost in technology, compliance, product design, employee time, and eventually the transaction itself. Some rules create real clarity or resilience. Others may deliver a few $100, a cleaner ad or an AM button most drivers never touch. These things are necessary.

Erin Keating:

I'm not fighting whether we should or should not be regulating, though I do point out that the industry does keep adapting. The fair question I think we need to always remember is what's the real consumer benefit? And is it large enough to justify that machinery, if you will, required to produce it? Or I guess put more simply, as I like to say, is that juice worth the squeeze? Well, that's it for me.

Erin Keating:

That's it for this episode. You can find more of our insights at cox auto inc dot com. And if the conversation was useful, please like the episode, subscribe to The Auto Market Brief, and share it with someone who follows the market as closely as we do. We'll be back soon with the economic high notes and industry headlines that matter. Thanks so much for tuning in.

Erin Keating:

Thanks for joining us on this episode of The Auto Market Brief. To stay up to date with all the latest news and perspectives from our team of experts, be sure to visit our insights hub at coxautoinc.com.