If you’re going to be in the market for a new car this year, it pays to know what sort of shape the auto industry is in and what sort of deals you can expect to find. If you haven’t shopped for new wheels in a while, you might be surprised at just how much the market has changed.
U.S. auto sales are still going strong, but they’re showing signs of weakening, according to industry analysts. Every expert I spoke with recently expects total sales to come in a bit below 17 million this year, which would be good, but behind the recent pace. Combined sales of cars and light trucks hit a record 17.5 million in 2016 and stayed above the 17-million market in 2017 and 2018; 16.8 million or a bit lower seems like a reasonable bet for this year.
What’s selling these days? Pick-up trucks and SUVs. Traditional truck stalwarts such as the Ford F-150 and RAM 1500 still roll off dealer lots in large numbers. Big SUVs are popular, too, but automakers are also scrambling to make more small and midsize SUVs. “It’s across the board,” says Kelly Blue Book Senior Managing Editor Matt DeLorenzo of the popularity of trucks and SUVs. Midsize pick-ups such as the Chevy Colorado are selling well, as are small, crossover SUVs. A couple of automakers are planning new, compact pick-ups, too. To paraphrase Alfred Sloan, General Motors’ longtime president during the first half of the 20th Century, the U.S. auto industry is now bent on offering a truck or SUV “for every purse and purpose.”
Traditional sedans, meanwhile, have fallen out of favor. Many once-popular nameplates have been retired or will be soon, and some automakers are abandoning sedans entirely. Large sedans are a dying breed, notes KBB’s DeLorenzo.
The shift to trucks and SUVs has driven the prices of new vehicles into nosebleed territory. Car shopping website Edmunds.com notes that a new auto costs, on average, more than $36,000, largely because of all the pricey trucks and SUVs buyers are snapping up. At the same time, interest rates on auto loans are at their highest level in years after the Federal Reserve hiked interest rates a couple of times.
Given the lofty prices and financing costs, shoppers not bent on a truck or an SUV should check out a sedan. They’ll find some compelling values. Many sedans have had design overhauls and been upgraded with premium features such as advanced safety systems and lavish interiors. Yet, their price tags are much less eye-popping than similarly equipped SUVs.
In terms of price discounts or other incentives, you might be surprised to find better deals on trucks and SUVs than on sedans, even though the latter aren’t selling as well. The prices of the former are so high that dealers have room to make concessions while still netting a solid profit. Also, dealers generally have larger truck and SUV inventories. To keep the bigger vehicles moving, dealers and automakers need to be willing to offer some discounts.
Whatever sort of new vehicle you’re looking for, it’ll pay to shop strategically. Jessica Caldwell, executive director of industry analysis at Edmunds, says that August and September should be good times to score deals because dealerships will be more eager to sell off 2019 models to make room for the 2020s. Year-end sales, when manufacturers get their last shot to pump up their annual numbers, figure to feature plenty of bargains, too.
She also urges consumers to not overlook the used market. A record number of vehicles were leased in 2016, which means a ton of late-models will need to be sold. That spells lots of opportunities among carmakers’ certified preowned programs. (CPO cars must pass manufacturer inspections and come with extended warranties.) Caldwell also notes that the technology you’ll find in a three-year-old car isn’t far behind what’s in new cars. Automakers have struggled to come up with new “wow” features lately.
A decade after it emerged from the Great Recession, when sales collapsed and two of Detroit’s Big Three filed for bankruptcy, just how healthy is the U.S. auto industry?
All the truck and SUV sales are a major boon for automakers. Their profit margins are hefty, especially when it comes to full-sized pick-up trucks. The Big Three, which dominate truck sales, are raking in particularly fat profits these days.
Moving more-profitable vehicles will cushion the blow of declining sales, says Bill Visnic, editorial director at the Society of Automotive Engineers. Plus, automakers’ operations are leaner a decade after the recession, which means they are less dependent on keeping sales volumes sky-high, he notes. Automakers would gladly opt to sell a smaller number of lucrative trucks and SUVs than a larger number of small sedans, which usually have razor-thin margins.
But that reliance on trucks and SUVs is also a liability. Haig Stoddard, industry analyst at WardsAuto, thinks total sales will come in at 16.9 million this year, but warns there is a fair amount of downside risk in that forecast, especially if the economy softens later in 2019. In that scenario, he expects that truck and SUV sales would take the biggest hit, given their high prices. After years of robust sales, the industry can’t count on as much demand from customers who really need to replace their old vehicle, Stoddard notes. Most of the folks who had put off buying a new vehicle in the wake of the recession have done so by now.
SAE’s Visnic echoes those concerns. Prices are “really getting a little bit scary,” he warns. Consumers can handle them, but only because they feel good right now about the economy and their own finances. If that positive mood sours, watch out. “A car purchase is a fairly discretionary thing” for most consumers, he points out. If they start worrying about the economy, they’ll easily punt on buying a truck or SUV that costs $40,000.