Now is the time to take advantage of stocks tied to used car sales over new vehicles as consumers opt for value buys and the industry faces a “tremendous amount of pressure,” automotive analyst Jamie Albertine told CNBC.
“That’s been a key trend and we think that bleeds into 2019 in a major way,” the Consumer Edge Research analyst said on Friday’s “Closing Bell.” “So we’re looking for stocks that have more exposure to the used vehicle side, quite frankly, than the new vehicle sales side.”
That includes used car platforms like Carvana, which Albertine says has built a national presence in the online retail sector. Tariffs have forced new car prices up, and consumers looking for auto loans have been confronted with higher interest rates, which Albertine said can amount to as much as $30 extra on a monthly payment.
The offset for right now in car lending, he said, is the question of whether or not consumers will be willing to take out auto loans with roughly 1 percent higher rates and foot the bill.
While auto sales are on pace to exceed 17 million cars sold for the fourth year in a row, data show there’s a “topping in the auto sales environment broadly” that’s starting to “bleed into smaller crossover utilities,” Albertine said.
“We’re seeing a substitution away from new vehicles to late-model used vehicles,” he said. “So what we’re really watching is, as SUVs come back to market off-lease and they’re 20 to 25 percent less [expensive] than the brand new vehicle counterpart, … consumers [are] opting for that value option,” which is often just as good as buying a new vehicle.
Albertine also suggested keeping an eye on suppliers such as Visteon and Aptiv that can “leverage into technology around autonomous vehicles,” a prospect in which major automakers have been heavily investing.
“I think you can find your pockets in terms of secular tailwinds going into next decade, and that’s where people are more focused,” he said.