Mark Rappaport
President
Simplicity Division
EFG Companies
It’s official. Auto sales have plateaued. Dealerships across the U.S. are reporting low sales numbers in comparison to last year. Manufacturers have increased incentives, but no one’s taking the bait. Looking at these headlines, it all looks like doom and gloom. But, let’s take a step back for a second.
According to Automotive News, the auto industry sold 17.5 million vehicles last year, representing a seventh straight year of growth. When put in that perspective, a plateau at 17.5 million vehicles doesn’t seem too bad.
Yes, vehicle sales aren’t hitting manufacturer projections, but seriously, how long did they really think sustained growth was going to continue? We’ve been in one of the longest economic expansions in U.S. history; the economy was bound to slow down at one point.
With that perspective in mind, economic indicators continue to be strong. National unemployment has hit its lowest level since May 2007. We’ve seen strong jobs gains in recent months. According to CNN, wages rose 2.5 percent in the past 12 months, and the median price of a home has risen to $236,400. Lastly, consumers are still taking on debt. According to the Federal Reserve, consumer credit rose 4.8% annually in February.
Clearly, there is still plenty of business available. This time of relative calm, with no abrupt economic changes, is the perfect time for auto lenders to catch a breath, regroup and re-address their go-forward plans with regards to loan volume.