Automakers have products to sell and lenders have money to loan, yet consumers continue to delay big purchases. Not only is the rent still too damn high, but the pre-existing economic uncertainty coupled with this being an election year and, well, the standoff for sales looks to continue well into the second half of the year.
According to Automotive News, August sales were flat despite having the most selling days of any other month this year. Labor Day, although in September, gets tacked onto August numbers but the holiday weekend didn’t provide the anticipated sales boost. As a result, industry analysts are reconsidering previous sales projections. GlobalData, for example, dropped its estimation by 200,000. The data analytics and consulting company now says the auto industry will sell 16.4 million units for the year.
“Signals indicate that US sales are losing momentum and we do not expect any measurable uptick in the daily selling rate in the coming months,” said Jeff Schuster, GlobalData vice president of research and analysis for automotive, in a Sept. 5 industry report. “Consumers who were displaced from the new vehicle market during the pandemic are still facing challenges in managing affordable monthly payments and many have yet to return.”
As with many things, affordability is a key factor. In general, people are holding onto their cars longer—a record 12.5 years. For those who do make a purchase, the average new-car transaction price is nearly $50,000. What was once considered luxury car territory is now the price of mid.
Loan lengths are now well beyond the once standard 60-month term, or monthly payments are ridiculously high. Cox Automotive says the average monthly new car payment is $767 but drops for leases and used cars to $558 and $566, respectively. However, one in five owners last year had monthly payments of $1,000, and that’s not counting insurance. Speaking of car insurance, expect skyrocketing premiums if you can find a provider. Then, even after all of that, vehicle repossessions have increased 23 percent compared to last year.
The struggle is real and it’s been there from the get-go. For cheap-seat options. there was the Mitsubishi Mirage and Nissan Versa. But Mitsubishi is discontinuing the Mirage and who buys a Versa on purpose?
“It’s going to be a very challenging second half of the year unless consumers get some relief,” said Tyson Jominy, J.D. Power vice president of data and analytics. He added that many consumers have been priced out of the market and automakers should reset their sales expectations as well as budget for more incentives.
“We need to reframe the way we think about the industry,” said Jominy. “I mean, a 17 million seasonally adjusted annual rate (SAAR)? We’re never getting back there.”