Analyst: Car Sales May Peak By 2017, Rising Rates Could Impact Buyers
(Updated with comment from GoodCarBadCar’s Tim Cain)
Analysts at IHS Automotive says car sales may be nearing its peak and automakers may expect a downturn in sales by 2017 due to rising interest rates, Automotive News reported.
Strong demand for auto loans is starting to wane, banks are reporting, and a pending federal interest rate hike could push some buyers out of the market, the agency reported.
After 2017 “credit markets are going to be much more difficult,” Charles Chesbrough, IHS senior economist, told Automotive News. Most analysts predict that interest rates will remain where they are for the rest of this year but many anticipate a rate hike by March 2016.
According to the firm, car sales may peak around 2017 at 18.2 million cars before dipping slightly to 17 million by 2022. Automakers are on pace to sell 17 million cars this year, which would be a record.
Chesbrough added that carmakers are in better shape to withstand a downturn than they have been in the past. Carmakers have significantly trimmed production excess and labor costs since the recession, he said.
Automakers reported strong sales for September, which was the 19th consecutive month for sales growth.
Our own Tim Cain said a slowdown should be coming, rate hike or not:Auto industry observers will have to get used to seeing, at the very least, a slowdown in growth. That won’t necessarily, at least at the start, imply lower volume. But the current rate of growth isn’t possible in perpetuity. In terms of lower volume, the industry will, after growth slows or stalls, see decreased sales as consumers who were “brought forward” with cheap money today won’t need to buy a car tomorrow.
"Strong demand for auto loans is starting to wane, banks are reporting, and a pending federal interest rate hike could push some buyers out of the market, the agency reported." The new car buys who depend on low interest rates to make their monthly payments belong on the used car market.
When an interest rate "hike" does come, it will be small, and relatively inconsequential. The sky is not falling, and it ain't gonna fall. If someone is looking for a car but can't afford it because the interbank rate just went up a half a percentage point, they shouldn't be looking for a new car, or should buy something about five hundred dollars cheaper, or negotiate the price down just a smidgeon. With VW sales falling, those buyers will go to a different dealership, and the other companies will benefit. So the predictions of doom and gloom carry just as much validity as those made by the religious wackos who foretold the end of the world last Wednesday.
Interest rates aren't going anywhere. Inflation will not be acknowledged. Talking about rate hikes is only about driving demand today. The national debt is too high to pay interest on.
Yes, no one is more hooked on cheap borrowing than our sweet old profligate Uncle Sam. So in all likelihood the savers will continue to subsidize the spenders.