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Despite automakers having vehicles to sell and lenders standing by with financing options, consumers are hesitating to make significant purchases. The high cost of rent, ongoing economic uncertainty, the upcoming election year, and stagnant sales indicate that this trend is likely to persist into the latter half of the year.
As reported by Automotive News, sales in August remained unchanged, even though it had the highest number of selling days this year. Although Labor Day falls in September, its sales figures are included in August, but the holiday traffic did not result in the expected sales increase. Consequently, industry experts are revising prior sales forecasts, with GlobalData adjusting its prediction downward by 200,000 units to a total of 16.4 million units for the year.
“Indications suggest that US sales are losing steam, and we do not foresee any significant increase in the daily sales rate in the upcoming months,” stated Jeff Schuster, GlobalData’s vice president of research and analysis for automotive, in a report published on September 5. “Consumers who were pushed out of the new vehicle market during the pandemic are still grappling with challenges in managing affordable monthly payments, and many have yet to return.”
Affordability is a major concern for many buyers. On average, people are keeping their vehicles longer than ever, now averaging 12.5 years. For those who do decide to purchase, the average transaction price for a new car is approaching $50,000—a price that was once associated with luxury models, but is now standard for mid-range vehicles.
Loan terms have expanded well beyond the traditional 60-month period, resulting in exorbitantly high monthly payments. According to Cox Automotive, the average payment for a new car is $767, whereas lease and used car payments are lower at $558 and $566, respectively. Alarmingly, one in five owners last year faced monthly payments of $1,000, not including insurance costs. Furthermore, car insurance premiums are predicted to soar, if coverage can even be found. Compounding these issues, vehicle repossessions have surged by 23 percent compared to the previous year.
These challenges have been evident from the start. For budget-conscious options, models like the Mitsubishi Mirage and Nissan Versa were available, but Mitsubishi is discontinuing the Mirage, and it raises the question of who intentionally chooses to buy a Versa.
“It’s going to be a very tough second half of the year unless consumers find some relief,” remarked Tyson Jominy, vice president of data and analytics at J.D. Power. He noted that many buyers have essentially been priced out of the market, urging automakers to readjust their sales expectations and allocate budgets for additional incentives.
“We need to change our perspective on the industry,” Jominy emphasized. “A seasonally adjusted annual rate (SAAR) of 17 million? We’re unlikely to see those numbers again.”
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