New-Vehicle Sales Will Take a Hit from Higher Prices, Interest Rates in 2019: Edmunds

New-Vehicle Sales Will Take a Hit from Higher Prices, Interest Rates in 2019: Edmunds

On average, new vehicles are $3,000 more expensive now than they were three years ago, and car shoppers can expect to pay nearly $1,800 more in interest over the course of a five-year auto loan.

New-vehicle sales will continue to decline in 2019, continuing a trend that began in 2017, according to a new report from Edmunds.

As part of the Edmunds 2019 Forecast and Trends Report, analysts forecast sales of 16.9 million new vehicles in 2019, compared to expected sales of 17.2 million new vehicles in 2018.

Despite the downward trend, Edmunds experts note that auto sales will remain at a historically high level, because positive economic factors such as low unemployment, high consumer confidence and low gas prices are expected to persist through 2019, and a surge in lease returns is expected to give the auto market a boost. 

“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 is that these shoppers are coming back to a very different market. New vehicles are much more expensive and interest rates are markedly higher than they were three years ago, which means most of these people won’t be able to buy a similar new vehicle for a comparable price.”  

Edmunds analysts anticipate rising interest rates and climbing vehicle prices will be the biggest headwinds the industry will face in 2019. On average, new vehicles are $3,000 more expensive now than they were three years ago, and car shoppers can expect to pay nearly $1,800 more in interest over the course of a five-year auto loan. Analysts expect interest rates near 6 percent will become the new normal in 2019, and average transaction prices will continue to hit records as automakers add more pricey SUVs to their product lineups.

“The auto industry will have a solid year in 2019, but in some ways it’s a house of cards,” Caldwell said. “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.”

The Edmunds 2019 Forecast and Trends Report also takes a deeper look into other major factors that will shape the industry through 2019, such as the ongoing transition to light trucks and SUVs away from passenger vehicles, record green-vehicle sales and market share; the impact of the expiration of tax credits on electric vehicles; and a rise in fleet sales as rental companies fight to stay relevant. The report is now available for download in the Edmunds Industry Center.

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