Record lease returns are expected to boost vehicle sales in 2019 according to forecasts from car shopping specialist Edmunds, but soaring prices and rising interest rates could create an affordability crisis.
New vehicle sales will continue to decline in 2019, continuing a trend started in 2017, with analysist forecasting that a total of 16.9 million new vehicles will be sold in 2019, compared to an expected 17.2 million vehicles in 2018.
Despite this downward trend, experts predict in the Edmunds 2019 Forecast and Trends Report that auto sales will remain at a historically high level, because positive economic factors such as low unemployment, high consumer confidence and low gas prices are expected to persist through 2019, coupled with a surge in lease returns.
Jessica Caldwell, executive director of industry analysis for Edmunds, said: “Since we reached 'peak lease' in 2016, more than four million consumers are expected to turn in their vehicles and come back to the market in 2019, which will have a major impact on new vehicle sales.
“The catch is that these shoppers are coming back to a very different market. New vehicles are much more expensive and interest rates are markedly higher than they were three years ago, which means most of these people won't be able to buy a similar new vehicle for a comparable price."
Edmunds analysts anticipate that rising interest rates and climbing vehicle prices will be the biggest headwinds the industry will face in 2019.
On average, new vehicles are $3,000 more expensive now than they were three years ago, and car shoppers can expect to pay nearly $1,800 more in interest over the course of a five-year auto loan. Analysts expect interest rates near 6% will become the new normal in 2019, and average transaction prices will continue to hit records as automakers add more pricey SUVs to their product lineups.
Caldwell said: “The auto industry will have a solid year in 2019, but in some ways it's a house of cards.
“As access to cheap and easy credit grows scarce, many buyers may be forced into the used market, or even be priced out of a purchase completely. If for some reason the economy suddenly collapses or if tariffs are enacted and raise prices even more dramatically, things could take a turn very quickly.”