Another Forecast Calling for Fewer New-Car Sales in 2018

Economist with Cox Automotive says off-lease crossovers to pull a few hundred thousand away from new-vehicle market.

byKate Gibson| PUBLISHED Jan 29, 2018 12:33 PM
Another Forecast Calling for Fewer New-Car Sales in 2018

This year is likely to be a strong one for the new-car market, yet it won't measure up to 2017.

New-vehicle sales are expected to increase 1 percent year-over-year to a 1.15 million units in January, which translates to an estimated 17.1 million seasonally adjusted annual rate (SAAR), according to Cox Automotive.

After a strong year of 17.1 million units, a top 5 all-time result, Cox Automotive expects 2018 sales to fall 400,000 units and finish near 16.7 million. 

"The vehicle market looks to be very strong going into 2018, as economic conditions are very favorable to buyers," Charlie Chesbrough, senior economist for Cox Automotive, said in a phone interview. Higher consumer confidence, a strong labor market, and low interest rates should mean "another good year for sales," he said.

Still, "we are expecting the year to be down a bit," said the economist, who points to expectations that interest rates will edge higher as one factor expected to put a small dent in new-vehicle sales.

Another element is a fair count of crossover vehicles leased back in 2014 and 2015 that are now coming back to dealerships. The off-lease vehicles are likely to provide a lot of competition to people who can afford a mid-size or small car or a 3-year-old crossover vehicle. "It's certainly not going to destroy the new vehicle market, but a few hundred thousand people will be pulled away," Chesbrough said.

The monthly SAAR is expected to fall to a pace in the low 17 millions, a strong level but down from December's 17.8 million and the 17.3 million seen in January 2017, Cox Automotive estimates.

New light-vehicle sales, including fleet, should hit 1.15 million units in January, up 1 percent compared to January 2017 and down 17 percent from December, the provider of auto information said.

Interest rates remain relatively low but are inching upward. Rates for auto loans are now the highest they've been since 2013, and "that trend is expected to continue," said the economist. An increase of half a percent would be a reasonable prediction for how much car loans will climb this year, he added.