Blame automakers for stuffing their cars full of expensive options.
It's only May but it's already become clear that the US won't surpass the high water mark for auto sales that Americans set in 2016 by the end of this year. Due to a number of factors weighing sales down, April's data confirmed the trend by showcasing yet another sales dip, this time by 2.3%, which forced analysts to lower their predictions for 2019's total sales by 390,000 units, according to Automotive News. It's a trend that's lasted the entire year, with none of 2019's first four months showing a sales gain over the same month last year. It was only a few years ago that automakers were celebrating 2016's record 17.6 million sales, but if things remain the same, 2019 will end with no more than 16.41 million cars, trucks, and SUVs leaving dealership lots.
Many automakers that lost sales, like Fiat Chrysler, Ford, and Toyota, lost with single digit percentage points between 6.1% and 2.85%. Others, particularly those with the first letter in their name being "M," weren't so lucky with Mazda, Mitsubishi, Mercedes-Benz, and Audi posting losses between 21.4% and 12.9%. Only Honda, Subaru, Nissan, Hyundai-Kia, and Volvo posted gains, but they weren't enough to overshadow sales from last April. So what exactly are the trends stopping Americans from hitting dealerships and enjoying the industry's current hot streak of great cars?
Well, it all has to do with rising prices and interest rates. Cars are now more expensive than ever, with the average consumer spending $33,319 on a new car, $1,000 more on average than last year. Trends like this mean automakers stock dealerships with more expensive cars.
That's happening at the same time as interest rates are on the rise, making it more expensive for consumers to borrow the cash needed to fund those new car purchases. "Forecasters have been expecting the market to slow as higher vehicle prices and higher borrowing costs squeeze many potential buyers," said Charlie Chesbrough, senior economist for Cox Automotive. "And indeed, the sales lion that surprised many in March became a much weaker lamb in April, as revealed in today's numbers. Robust employment conditions and a strong stock market didn't seem to be enough to lift sales last month."
Just because new car sales are on the decline doesn't mean that Americans have put their automotive love affairs on hold, it just means they're moving to the used car lot. Certified Pre-owned vehicle sales are expected to hit another record this year, signaling to automakers that the party may not be over just yet.