Automakers sold 17.55 million vehicles in 2016, marking the second consecutive year of record sales, however, this pattern has “hit a peak,” Anil Goyal, senior vice president of operations at Black Book, told Auto Finance News. A combination of declining used-vehicle values and tightening subprime credit will constrict sales growth in the new year, he predicts.
“Demand has been pretty strong as we recovered [from the Great Recession], and we had significant pent-up demand as more and more people got jobs,” Goyal said. “But that pent-up demand has been long spent, and we’re now into more of a stabilized demand growth.”
In 2016, funding started to tighten and lenders began to restrict credit criteria for the first year since the post-crisis era, he said. That tougher credit environment combined with depreciation of used-car values — due to a 25% year-over-year increase in off-lease volume — will likely lower 2017 vehicle sales to around 17 million, Goyal added.
However, last year’s sales were perhaps driven too much by incentives, Goyal said, which will hurt captive lender’s residuals in the long run. “We expect that manufacturers will realize that, and they’ll start to trim back their production and not go down that very dangerous cycle of trying to push sales through more incentives,” he added.
