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Car Sales Drop In April, While Light Truck Sales Stay Flat

May 19, 2017

According to Bloomberg News, U.S. auto sales dropped 4.7% in April, the fourth consecutive month that demand has fallen for new cars and trucks, with international brands accounting for 55.5 % of the U.S. auto market, compared to 44.5 % of the market for domestic brands.

According to AutoData Corp., the seasonally adjusted annual rate (SAAR) for April 2017 was 16.88 million units versus 17.40 million units a year ago. More than 1.4 million light vehicles were sold in April, down from 1.55 million in March and 1.5 million in April 2016.

Analysts say automakers are increasing incentives and low-to-zero-rate financing in order to boost sales in the short-term. Meanwhile, record numbers of leased vehicles are hitting the used-car market, which depresses used-car prices and causes some consumers to purchase used vehicles instead of something new.

Some Analysts Worry About A Lending Bubble

New vehicle sales have set records in each of the last two years-juiced by continuing low interest rates, incentives and generous lending practices. Now, with pent-up demand mostly met, sales are on track to decline this year for the first time since the recession. That means manufacturers and lenders will have to make sales and loan terms even more attractive than they have been, if they want to maintain volume.

As sales have begun to flatten or fall, dealers and lenders have worked harder to accommodate consumers with lower credit scores. At the end of last year, Americans owed about $1.2 trillion in auto loan debt, a record amount, representing approximately 9.2 % of total household debt. That is the most since the end of 2002. Roughly a quarter of that debt is owed by borrowers with subprime credit scores, according to Equifax.

As those borrowers drive up delinquency rates overall, some lenders have tightened their credit standards, requiring higher scores and larger down payments. But others, particularly finance companies that specialize in loans to subprime borrowers, are moving in the opposite direction. Lenders have also been more willing to offer loans for longer terms. At the beginning of 2010, the average auto loan in the U.S. lasted 62 months. By the end of last year, the average had risen to 68 months, according to Moody’s research. And 32 % of loans had terms of longer than six years-up from 29 percent just a year earlier.