Following the first-quarter, the growing demand for light trucks over cars will continue to be noticeable, but this will likely be more of a quandary for creditors rather than dealers, says National Automobile Dealers Association chief economist Steven Szakaly.
“The falloff in those sedan prices and then the returns of those leases are much more of an issue for finance companies than they are actually for the retail body,” Szakaly said during a media conference call on Wednesday where he and NADA chairman Mark Scarpelli shared insights on the overall economy following the first quarter.
Sedans have lost about 12 percent market share so far this year, and trucks have gained a little above 7 percent, according to Szakaly.
“This is just a continuing story that we see consumers switching to the utility of crossover vehicles, sport-utilities and other light trucks — choosing those over the sedan segment,” he said. “The used-car business remains strong. Sedans are under pressure and clearly we’re seeing that sort of used-car pricing starting to certainly become more negative as a lot of these off-lease vehicles are coming in, but these are manageable issues I think for this industry.”
Szakaly predicts overall new-vehicle sales will total 17.1 million vehicles this year.
“We have economic growth that continues to be what we say is moderate. We are looking at growth here in the first quarter right around 2 percent, forecasting 2.1 percent — still below trend and still below what we’d like to see in terms of economic activity above 2 and a half or even closer to 2 percent,” he said. “What continues to be a net positive is employment, employment growth continues to be strong with plus 200,000 thousand jobs being created in January and February.”
Though the total number of U.S. jobs have seen an increase in recent weeks, wages themselves have remained stagnant and that has a significant impact on the used-car market in particular because consistently high wage earners tend to buy new, he explained.
“Slightly on the negative side, we’ve got this lack of wage growth overall and that continues to be one of the fundamental troubling factors," Szakaly said.
"With the economic growth that has continued here since 2009, wages have not been rising and they haven’t kept pace with some of the rise in prices.”
Despite a decrease in the purchase of sedans overall, customers who can afford their desire for small luxury vehicles are likely to make a purchase this year, according to a recent Jumpstart Automotive Media study that analyses consumers’ car shopping behavior, as well as what segments of vehicles are either gaining or losing traction.
Sedans within luxury-vehicle segment sales grew 7 percent from 2015 to 2016, and shopper interest for midsize and full-size luxury sedans rose over 10 percent, according to the study.
“As long as people are working they are going to be looking at buying new vehicles and used vehicles,” Szakaly said.