Automakers Confront an Uncertain New Vehicle Market in 2019, According to New Edmunds Report

SANTA MONICA, Calif., June 26, 2019 /PRNewswire/ -- 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.

"Automakers are fighting a war on multiple fronts right now: Old cars are piling up on dealer lots, a glut of affordable off-lease vehicles are luring shoppers into the used market, and even with the Fed anticipated to lower rates in July, higher interest rates are here to stay," said Jeremy Acevedo, Edmunds' manager of industry analysis. "Strong economic indicators such as consumer confidence and low unemployment are keeping sales at historically elevated levels, but automakers have also been relying a little too heavily on fleet sales to keep these numbers up as well, which isn't a sustainable model."

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 $2,000 more 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.

To read the full report, visit the Edmunds Industry Center.

About Edmunds

Edmunds guides car shoppers online from research to purchase. With in-depth reviews of every new vehicle, shopping tips from an in-house team of experts, plus a wealth of consumer and automotive market insights, Edmunds helps millions of shoppers each month select, price and buy a car with confidence. Regarded as one of America's best workplaces by Fortune and Great Place to Work, Edmunds is based in Santa Monica, California, and has a satellite office in Detroit, Michigan. Follow us on Twitter, Facebook and Instagram.

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