Discussing February’s numbers, buying patterns and the impact that rising interest rates may have on consumers and dealerships is Jessica Caldwell, Director of Industry Analysis with Edmunds.com. Even though the industry has started the year off strong, there are projections could take a few different turns outside of what initially was expected.
February 2018 produced a 17 million SAAR which is higher than what was being anticipated. Does this sound familiar to you? If you remember, the first few months in 2017 produced numbers and patterns almost identical thus drawing a lot of comparisons. This causes many to not get overly excited as we also saw numbers drop last summer, only to climb again towards the end of the year, again proving how anything can happen. As it is not highly recommended to overly read into this, it does show some promise as February did track strongly.
Interest rates were also something that was watched closely in February as they were expected to soar to the highest numbers in about eight years. New car loans APR’s increased to 2.5% which is much higher than we have seen historically. This should not come as a shock as we have watched this growth inch up slowly. The consumer group that will feel impacted the most by this gain are buyers who have mid-range credit scores. What once would be a two-three percent rate for new vehicles could climb up to a six percent range for this demographic. With the growth in consumers buying and wanting more glitz and gadgets, it will be easy to see monthly payments reach those high rates.
Another area that you can expect a constant number or growth is within vehicles for lease. What was predicted to fall this year may actually do the opposite. Due to more drivers shifting focus to monthly payments, in combination with wanting the newest and best model, and of course factoring in the increasing interest rates, shoppers as gravitating towards leasing and the flexibility it provides.