Slowdown predicted for U.S. auto sales

Slowdown for U.S. auto sales predicted

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Vehicle sales might be tapping the brakes, according to a new J.D. Power report, which is predicting the weakest first-quarter sales numbers for new vehicles since 2013.

Retail sales of new vehicles in the first quarter are expected to fall 4.9% compared with the first quarter of 2018, the marketing research company says. For March, total vehicles sales are predicted to fall 2.1% compared with the same period a year ago.

New vehicle prices, which are on pace to hit an average of $33,319 in the first quarter, could be a factor in the projected weakness in sales.

Why have sales slowed?

There are a few factors that could be contributing to slowing auto sales.

For one, the popularity of higher-priced vehicles is on the rise, according to the J.D. Power report. Cars priced at less than $25,000 are expected to see a 12% decline in first-quarter retail sales, the report shows. But SUVs and trucks, which have a higher average price than cars, made up 68.7% of March new vehicle retail sales, the best March ever for the category.

That could mean buyers are taking on more auto loan debt than they have in the past to buy more expensive vehicles.

This is backed up by recent findings from the New York Fed that showed some troubling indicators about borrowers’ ability to pay their auto loans. The 90-day delinquency rate on auto loans climbed to 2.4% at the end of 2018, nearly double the post-recession low of 1.5% in 2012.

Rising auto loan debt combined with rising average car prices could be leading consumers to put off plans for car purchases.

What does this mean for you?

In a higher-priced environment, it’s important to make sure you’re getting a fair deal. To start that process, think about how much car you can afford before you go into a dealership.

If you’re in the market for a new vehicle, the news on interest rates isn’t bad. The Federal Reserve, which recently announced plans to leave interest rates unchanged, indicated it would be unlikely to raise rates this year. Since the Fed’s interest rates can affect the rates you pay on all kinds of loans, including auto loans, steadier rates from the Fed could be good news for car shoppers.

About the author: Paris Ward is a content strategist at Credit Karma, providing readers with the latest news that will aid their financial progress. She has more than a decade of experience as a writer and editor and holds a bachelor’s… Read more.