At year’s midpoint, are car sales still booming?
After a stellar 2016, automakers and forecasting experts expressed confidence nationwide car sales would maintain their breakneck pace in 2017. Indeed, IHS Markit predicted global car sales were poised to reach 93.5 million on the year, and the Center for Automotive Research forecast a 2% uptick in U.S. auto purchases.
At the year’s halfway mark, are these lofty predictions holding up? Not by a mile, analysis suggests.
While certain nameplates have hustled off showroom floors, on balance, new-vehicle sales haven’t lived up to the hype. In April, as an example, an estimated 1.4 million new cars and trucks sold in the U.S., amounting to a seasonally adjusted annual rate of 17 million, according to car shopping platform Edmunds. That’s down 8% from the previous month and off 4% on a year-over-year basis.
Motor vehicle purchase frequency didn’t improve much in May. Retail sales totaled 1.2 million on the month, according to LMC Automotive and J.D. Power and Associates. A decrease of nearly 3% compared with the same period in 2016, the seasonally adjusted annual rate was 13.4 million, or 212,000 fewer compared with last year.
Jessica Caldwell, director of industry analysis for Edmunds, indicated that given the trend, slowing sales may continue.
“These year-over-year declines [could] become more typical as the year progresses,” Caldwell warned. “But there’s no reason to be in panic mode. Historically, car sales are still strong.”
Car buying surge in past decade
Thanks in part to incentives and discounts, consumers have purchased both new cars and various types of auto insurance at a rapid clip over the past decade. During the lead up to the recession, motor vehicle sales understandably slipped, dropping to 10.4 million from the previous year’s 13.2 million and 16.1 million in 2007, according to USA Today. Since 2009, sales have strengthened consistently, reaching 17.5 million last year, slightly above 2015 as the most ever in a calendar year.
But it’s looking like the car buying boom may have finally reached its ceiling, prompting forecasters to ratchet down their previous presumptions. For instance, Morgan Stanley believes the grand total will be 17.3 million once 2017 concludes. That’s 1 million fewer than what the investment giant had predicted.
Unlike home listings, which are snatched up almost as quickly as they’re put up for sale, new cars are remaining on lots for longer periods. On average, vehicle turnover at auto dealerships is approximately two-and-a-half months, according to J.D. Power. It’s the first time turnover has been above the 70-day threshold since 2009.
Auto sales may dip to 17.1 million in 2021
Though some describe the pullback as more of a blip than a long-term trend, others believe it’s a forerunner of what’s to come. The Freedonia Group, a subsidiary of MarketResearch.com, is predicting 17.1 million light-vehicle buys in 2021, due to short-term interest rate hikes. Most new-car buyers finance their automotive purchases.
What does this all mean for consumers? It could result in deep discounts, cooling off sticker prices for budget-minded buyers. New-car transaction prices in May averaged $33,261, according to vehicle valuation firm Kelley Blue Book. That’s roughly 3% more from a year earlier.
Whether you’re buying a new car or are shopping around for a new insurer, Elephant Auto Insurance has just the policy that you’re looking for and at the right price.
This article is intended for informational purposes only. It does not replace or modify the information contained in your insurance policy.