Fact Checked

Dealerships feel the strain as auto prices rise — and sales slow

Man driving his car, looking stressed Image:

Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors' opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted. Read our Editorial Guidelines to learn more about our team.
Advertiser Disclosure

We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

Auto sales are decelerating as Americans increasingly hold off on car buying —  and one big reason seems to be skyrocketing prices, a recent report shows.

New vehicle sales in the first half of 2019 are projected to be the weakest of any six-month period since 2013 — about 3.3% lower than for the same time period last year, the report from J.D. Power and Associates says.

The J.D. Power report also notes that new vehicle prices are set to reach an average of more than $33,000 in the first half of 2019, up 4% from 2018 and a new record.

And dealerships around the country are starting to feel the pressure, with vehicle inventory sitting around longer than in previous years, even when it comes to more popular models like SUVs and trucks, The New York Times reported.

Want to know more?

What’s going on with the vehicle market?

One theory for the slowdown is that new-car prices have simply gotten too high for a lot of people to tolerate. Another contributor could be that vehicles are simply lasting longer than vehicles of the past, making it easier for drivers to put off car shopping and stick with their older wheels longer, The New York Times noted.

Adding to the mood: Among those who have bought new vehicles, many are struggling to pay for them. Data from the New York Federal Reserve going back to the end of 2018 show that delinquent auto loans are on the rise.

This could be why more people are skipping buying altogether — or are opting to buy used cars instead. Used car sales from franchise dealers are on track to rise about 9% for the first half of the year, according to J.D. Power.

How could vehicle sales impact the economy for the rest of 2019?

While reduced demand could push dealers to cut vehicle prices, lower vehicle sales aren’t a great sign for the economy.

According to The New York Times, vehicle sales make up the biggest chunk of U.S. manufacturing — about 3% of the total gross domestic product, or GDP, a popular measure of the size of the economy. So a slowdown in the auto sector could have big consequences for overall U.S. economic growth and the millions of Americans who work in the auto industry.

In the short term, it’s a good idea to keep an eye on interest rates. The Federal Reserve earlier this year indicated it didn’t plan to increase interest rates any time soon. And it’s possible that when the Fed meets at the end of July, it might actually lower rates.

Lower interest rates could mean better rates on auto loans, potentially revving up Americans’ interest in buying new cars later this year and easing the stress on car dealerships.