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New Vehicle Market Uncertain in 2019, According to New Edmunds Report

The strong economy keeps new car sales at historic highs, but analysts question how long…

  • July 18, 2019

The strong economy keeps new car sales at historic highs, but analysts question how long this will last in the face of higher interest rates, shifting government policies, and a used vehicle market with more attractive options than ever, according to a new report from Edmunds. Consumers can benefit from this uncertainty.

So far 2019 has been a year of contrasts for automakers as they struggle to find a new normal amid rising interest rates, waning demand, dramatic growth in the used market and uncertain government policies.

Edmunds analysts break down these issues and the major factors influencing the new vehicle market this year in the Midyear Update of the Edmunds 2019 Automotive Trends Report.

According to Edmunds data, new vehicle sales are down 2.4% year-over-year through May, and Edmunds analysts maintain their forecast that 16.9 million new vehicles will be sold in 2019.

In addition to a deeper dive into sales figures, the Midyear Report also reveals:

  • A strong economy is propping up what could be an even weaker auto market. Unemployment is at 3.6%, the lowest since 1969, and consumer sentiment is at its highest level of 2019.
  • Elevated inventory levels are setting the stage for attractive deals this summer. Even though inventory dipped below 4 million units in May, analysts say this is still too high given current demand. Interest rates are making it more expensive for automakers to offer bargain-basement deals, but shoppers can expect decent incentives at least through the summer months until automakers can adjust production.
  • Increasing interest rates continue to create affordability issues for car shoppers. The average annual percentage rate (APR) on new vehicle loans is 6.2% this year. According to Edmunds data, a shopper will spend about $2,000more in interest on average over the course of a loan in 2019 compared to three years ago.
  • Higher prices aren’t enough to convince car shoppers to break the leasing cycle. Through May 2019, lease penetration hit 32.2%, the highest Edmunds has on record since 2002. Thanks to higher interest rates, the average new vehicle lease in 2019 costs $1,965 more than it did in 2016, and the average monthly payment is $536, which is $46 more than in 2016.
  • A glut of off-lease used vehicles will continue to put pressure on new car sales as a more affordable option for car shoppers. In 2010, a 3-year-old used car cost on average $8,996 less than a new car; in 2019, a 3-year-old used car is on average $13,535 less.
  • Green car sales are on pace to hit a new record, but automakers still struggle to get EVs to appeal to a wide audience. Edmunds anticipates 700,000 EVs and hybrids will be sold in 2019, and while that will be a new record, the narrow appeal of EVs to affluent males in coastal states limits further growth potential.

So far this year, Tesla accounts for 82% of EVs sold, and 28.9% of all Teslas sold this year were to men in California.

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