WardsAuto is forecasting sales of 1.61 million light vehicles in March, which would be the most sold in the month since 2000. The report also forecasts a seasonally adjusted annual rate (SAAR) of 17.2 million vehicles. This is below the 17.4 million SAAR from the first two months of 2017 combined, but well above the 16.6 million from March 2016. Light truck sales are estimated to account for 62% of the market, with cars making up the remaining 38%.
Production plans at North American plants are responding to this shift in vehicle-type demand with a 5.8% increase in light truck output and a 4.9% decline in car builds for the second quarter on 2017. The streak of record-high inventory is expected to continue with 4.2 million units at the end of March, 10.8% greater than March 2016. This will leave automakers with a 71-day supply, down from February’s 74 days, but higher than the 66-day supply in March 2016.
WardsAuto and Kelley Blue Book are both currently forecasting sales of 17.3 million vehicles in 2017. J.D Power and LMC Automotive forecast sales of 17.6 million vehicles and the forecast from Moody’s Investors Services falls in-between the others at 17.4 million vehicles sold in 2017.
When Vehicle Sales Plateau, Risks Rise For Lenders
According to Moody’s Investors Services, competition to finance car loans is set to intensify and drive increased credit risk for auto lenders as auto sales begin to plateau. Moody’s states that when lenders begin competing for a fewer number of loans, they may loosen loan terms and loan-to-value criteria.
Moody’s reports that dealers typically add an amount equal to the negative equity to a loan for the consumers’ next vehicle. Over the course of multiple trade-ins, negative equity accumulates, which results in a rise in lender risk and an increase in loss exposure.Manufacturers could subsidize lenders or increase incentives to reduce purchase prices, but either action would reduce their profits, according to Moody’s. Lenders could further lower annual percentage rates and keep extending loan terms, but that would increase their credit risk.
Used Vehicle Sales Could Top 3.6 Million In March
Used-car sales this month could approach 3.64 million units, according to a recent forecast by ALG. This would represent a 2.4 % increase from March 2016. The gains came in spite of several obstacles in March including winter storms that disabled dealerships in the Northeast for several days, delayed tax refund payments and rising interest rates.