Auto finance companies can expect new light vehicle U.S. sales to maintain its 17 million unit pace for the remainder of 2018 and relative strength heading into 2019, according to an industry forecast.
With positive “green light” factors such as consumer confidence, economic growth, job growth, tax reform, the housing recovery, and credit availability, vehicle sales the next 12 months will continue much the same way as in the previous years of the current economic recovery. But headwinds for the industry continue to gather like a South Atlantic tropical storm and could come ashore in the second half of 2019 creating conditions for possible downside risk.
“Going into 2020, recessionary risks could intensify,” Mike Wall, executive director of automotive analysis for global automotive consulting company IHS Markit, said. “Policy mistakes remain the biggest risk to the current expansion.”
Wall said he slightly increased his 2017 light vehicle forecast recently from his original forecast. “It’s tough to be bearish on the industry,” he said. “We are above the (sales) expectations we had last January.” Adding to Wall’s stoplight summary of economic factors, under the yellow light is wage growth, incentives vs. transaction prices, and tariff and trade tensions.
His red light signals are interest rate hikes by the Fed, the shifting of vehicle sales from new to used, risk policy mistakes, lease returns, used vehicle pricing and vehicle affordability pricing. He said the new car U.S. market will continue to be dominated by light trucks (pick-ups, SUVs, and crossovers) but passenger cars will remain in demand because of affordability issues. The spread continues to widen, however, as 11.7 million light trucks will be sold this year vs. 5.3 million passenger cars.
