From a standpoint of car sales, 2016 really went out with a bang, as data shows that lots of people saw December as the time to buy a new car. A seasonally adjusted annual total of 17.4 million new-vehicle sales took place during the month, according to vehicle valuation firm Kelley Blue Book, making it the runaway leader as the busiest of the year for the nation’s dealerships.
Can we expect more of the same in 2017? History would suggest otherwise, especially in the immediate aftermath of a sales surge. But this year could be an exception to the rule, according to a recent report forecasting what the automotive purchase market will be like in the forthcoming months.
It may not start out that way, though. In January, for instance, new-vehicle sales are likely to total 874,400 cars bought, according to J.D. Power and Associates. That’s a 2 percent dip on a year-over-year basis.
This cooling trend was anticipated last year, but with deregulation now taking hold under the new administration of President Donald Trump, sales are expected to intensify.
“After an overheated close to 2016 and the increased likelihood of deregulation and fiscal stimulus from the Trump administration driving the economy higher, we now expect 2017 to be another record year in U.S. auto sales,” noted Jeff Schuster, senior vice president of forecasting at LMC Automotive. “[However], there is a lot of runway before the year is complete. While there are many variables to consider this year, one area of caution is the large number of lease maturities repopulating the used-car market.”
One-third of car sales last year were leases
Indeed, thanks to a low-interest rate environment, leasing activity was brisk throughout virtually all of 2016, hitting a record-high of 4.3 million vehicles, according to analysis recently made available by vehicle information firm Edmunds. Lease volume has risen over 90% going back to 2011, and last year, nearly one-third of all-new vehicle sales were done via the leasing route.
Jessica Caldwell, executive director of industry analysis at the Santa Monica, California-based car information and shopping website, said leasing serves as a convenient alternative to the traditional purchase method – especially for those who like the new-car experience.
“Leasing has long been the gateway for car shoppers who are looking to get a nicer vehicle than they could if they financed,” Caldwell said. “Because SUVs and trucks are holding their values so well right now, it makes them much more accessible for a much wider swath of the market, further fueling their popularity.”
Then again, maybe not…
Bullish predictions aside, not everyone is convinced of the motor vehicle sales surplus. Automotive experts interviewed by Bloomberg point out that everything that goes up has to come down eventually, and 2017 is shaping up to be when the laws of gravity come into play, due to a confluence of factors like rising interest rates and gas prices.
However, economists acknowledge that a potential caveat is the Trump administration and what policies take hold.
As it always does, time will tell whether car sales in 2017 sizzle or fizzle.