New vehicle sales in the U.S. are expected to decline in 2019 — dipping to 16.9 million from the 17.2 million that is expected to be sold in 2018, according to a report from Edmunds. The decline continues a downward trend that started in 2017.
There are several factors at play, but the news is not all bad. Sales should still hover around a “historically high-level”, thanks in large part to positive economic factors (low unemployment/gas prices, high consumer confidence) and a surge in lease returns.
“Since we reached ‘peak lease’ in 2016, more than 4 million consumers are expected to turn in their vehicles and come back to the market in 2019, which will have a major impact on new vehicle sales,” said Jessica Caldwell, executive director of industry analysis for Edmunds.
The catch, she adds, is that these car buyers will be returning to a very different market. The price tag on new vehicles are much more expensive and interest rates are markedly higher compared to three years ago. The majority of these consumers will not be able to purchase a similar new vehicle for a comparable price, according to Caldwell.
These two issues are anticipated to be the biggest headwinds the auto industry will face in 2019. Climbing auto prices means, on average, new vehicles are $3,000 more expensive than they were three years ago. And for consumers that choose a five-year vehicle loan? They will be putting down an estimated $1,800 more in interest, as 6 per cent rates are expected to become the new normal.
“The auto industry will have a solid year in 2019, but in some ways it’s a house of cards,” said Caldwell. “As access to cheap and easy credit grows scarce, many buyers may be forced into the used market, or even be priced out of a purchase completely. If for some reason the economy suddenly collapses or if tariffs are enacted and raise prices even more dramatically, things could take a turn very quickly.”
