Cars Under $30K Are Turning 20% Quicker. My Read for Dealers and Contractors

From the first quarter to the third, cars listed between $20,000 and $29,999 sat on dealer lots 20% fewer days, per Edmunds data reported by CNBC. That is not a car story. That is a buying signal. My read: if you sell cars, HVAC systems or roofs, the person across your desk is making a very different call this month than they made in January.

Cheap Cars Just Started Turning Faster Than Everything Else

Edmunds data shows that from the first quarter to the third, cars listed between $20,000 and $29,999 sat on dealer lots 20% fewer days (CNBC). No other price tier sped up that much.

The $30,000-to-$39,999 tier moved about 18% quicker. The $40,000-to-$49,999 tier cut its time on the lot by close to 12% (CNBC). Everything below $50,000 turned in under 60 days, with the cheapest moving fastest. Everything above $50,000 took longer than 60 (CNBC).

Put that next to what a new vehicle listed for in September: $49,726 on average, per Cox Automotive (CNBC). The fast movers all sit below that sticker.

Now the twist. Sales of the cheap stuff are down, not up. Compact car sales have slipped about 4% since January, and compact SUVs nearly 8% (CNBC).

My read: fewer cars, faster turns. That is supply wearing a demand costume. The real question is what the buyer does after they walk off that lot, because that buyer is stretched. About one in four people financing a purchase are signing 84-month loans, a record. Nearly three in ten vehicles traded toward a new one were worth less than the loan still owed on them (CNBC). Incentives ran around 6.6% of the typical transaction price in October, and leasing rates fell too (CNBC).

Why the Cheap End Keeps Shrinking

This is not a mystery, and it is not a one-quarter blip. Cox Automotive deputy chief economist Mark Strand pointed to supply trouble at the low end and said the market has to be graded on a curve until fourth-quarter numbers land (CNBC).

Two popular models explain a lot of it. The Toyota RAV4, the top-selling SUV in the country, has been hard to find at many dealerships this year while the automaker moves production to its Kentucky plant and shifts the whole lineup to hybrids (CNBC). Ford dropped the Escape to clear room for an upcoming midsize electric pickup (CNBC).

The bottom of the market has been hollowed out for a decade. Sam Fiorani, vice president of global forecasting at AutoForecast Solutions, said, "We've seen the disappearance of affordable, compact new vehicles over the last decade" (CNBC). He added, "You have all these brands that have just abandoned the marketplace" (CNBC).

Right now no American automaker sells a compact passenger sedan. Most of what is left is Japanese or Korean, plus a few German models like the Volkswagen Jetta and Golf (CNBC). The smallest passenger cars from American brands are the Ford Mustang, the Chevrolet Corvette and the Tesla Model 3, per AutoForecast Solutions, starting at $33,490, $71,300 and $34,990 (CNBC). The Civic, Corolla and Jetta all come in under $25,000 (CNBC).

So the price points buyers want are the ones in shortest supply. Wholesale used prices on compact cars have climbed more than almost any other segment (CNBC). That pushes those shoppers toward used cars, or toward keeping the car they already have.

What This Means for an Owner Who Sells (My Read)

Here is where I stop reporting and start talking to you like I would across a desk. Three scenarios. All three are hypothetical, and all three are happening in somebody's market right now.

Picture a used-car manager. He has a sedan in the $20,000-to-$29,999 tier and a truck above $50,000 on the front line. The sedan turns in under 60 days. The truck sits past 60 and keeps sitting (CNBC). Nearly three in ten cars in his trade lane are worth less than the loans on them (CNBC). My read: his best closer belongs on the cheapest cars, not the most expensive. And his appraisal lane matters more than his showroom this quarter. Edmunds' Ivan Drury said trade-in data suggests many of these fast sales go to first-time buyers or people adding a second vehicle, and that repeat buyers are less likely to step down (CNBC).

Picture an HVAC company. A homeowner calls about a system that is on its last summer. He wants the full replacement number, and he gets it. Then he goes quiet. The same math Fiorani describes in car buyers shows up in HVAC. "Compact vehicle buyers are very price-sensitive," he said (CNBC). A homeowner watching gas prices climb is running the same numbers. When fuel costs rise, they eat into a car payment (CNBC). My read: the money that was going to be a down payment on a system goes into the tank and the note. If your only offer is the full system, that homeowner does nothing, patches it, or calls the guy who offered a repair.

Picture a roofing contractor. Two bids land on the same kitchen table. One is a full tear-off. The other is a repair with a written plan for the full roof later. With a car payment that just got longer and a trade-in that is upside down (CNBC), the homeowner takes the second bid. He is not choosing the worse roofer. He is choosing the smaller number this month.

The pattern is the same in all three. The customer is not shopping for a product anymore. The customer is shopping for a monthly number they can survive.

How to Use This Week

Six things. Most take under an hour. Do them in order.

1. Sort your last 90 days of sold work by ticket size. Open your CRM, your invoice list or your job board, export it to a spreadsheet, and sort smallest to largest. Twenty minutes. Then look at close rate on your lowest priced option versus your highest. If the cheap one closes at double the rate, you just found your ad budget.

2. Measure your own days-to-close. For each sold job, count the days from estimate to signature. Do the same for every unsold estimate. My read: your low-ticket quotes probably close faster, the same way cheap cars turn faster. Put your follow-up time where the turns are fastest.

3. Build one lower entry offer that still makes money. HVAC: a diagnostic and repair visit with a written replacement plan attached. Roofing: a repair with the full replacement quoted separately and dated. No invented discounts. The point is to give the price-sensitive caller a door that opens.

4. Rewrite the first 30 seconds of your phone answer. Most shops lead with a sales pitch. Lead with a question instead. On an HVAC call, ask whether the goal is to get through this season or to replace the system. Say both answers are fine, and that if the monthly number is the worry, you will show the repair path and the replacement path side by side.

5. Give your reps a payment-first script. Total price scares people right now. Monthly does not. On a roofing call, ask what the next twelve months look like for their budget, then tell them which option you would pick if it were your own house.

6. Put the smaller option at the top of your ads and your site. Not buried on page three. One line each. Something like: repair first, replace when you are ready, both numbers shown side by side before they decide.

Then check your follow-up. Pull every estimate from the last 60 days that did not close and count how many touches each one got. If the answer is one, that is your leak, not your price.

Mistakes to Avoid

• Chasing the big ticket because it feels like the bigger win. The fast money is at the low end right now. Your team's calendar should show it.
• Cutting price instead of adding an option. A discount trains the customer to wait. A repair-first path gets them to yes today and keeps the full job alive.
• Reading a fast-selling cheap car as a healthy buyer. A record share of 84-month loans and nearly three in ten upside-down trade-ins say otherwise (CNBC). Build the offer for a stretched wallet.
• Ignoring the used side of your own business. Wholesale compact prices are climbing (CNBC). If you take trades or sell used equipment, that is money sitting in your appraisals.