Auto sales keep falling despite strong U.S. economy

Unemployment is down, consumer confidence is up, and gas prices and interest rates are still low.

Even so, U.S. auto sales fell three per cent last month.

It was the sixth-straight monthly decline as sales dropped off last year’s record pace. For the first six months, car and truck sales fell 2.1 per cent, the first such decrease since the financial crisis in 2009.

But auto executives and industry analysts say it’s no cause for panic. Sales are still strong and aren’t expected to plunge anytime soon. Plus, buyers are still loading out trucks and SUVs with high-priced options, and that’s likely to boost earnings, at least in Detroit.

Sales are falling largely because people who delayed car and truck purchases in the years since the Great Recession have bought new ones, says Jessica Caldwell, executive director of analysis for Edmunds.com. Also, auto companies are cutting lease deals as used-car values fall, curtailing another incentive to buy. And people with lower credit scores are feeling the pinch from lenders, sending many into the used car market, she says.

In June, Ford, General Motors, Fiat Chrysler and Hyundai all reported sales drops. Fiat Chrysler sales were down 7.4 per cent, while Ford said its sales declined five per cent. GM was off 4.8 per cent and Korean automaker Hyundai posted a hefty 19.3 per cent decrease. Nissan, Toyota and Honda each reported small increases on Monday, but they weren’t large enough to offset declines in Detroit. Volkswagen brand sales rose 15 per cent over depressed numbers from last June.

Autotrader senior analyst Michelle Krebs says the small firsthalf dip is not an indication of broader economic troubles. She doesn’t expect a big recovery in the second half of the year, but also doesn’t see a huge decline, predicting full-year sales from between 16.8 million to 17.3 million. That’s still below last year’s record of 17.55 million. “We think the second half could be a little bit stronger than the first half was,” says Krebs, who expects 2016 still to be the fifth-best year on record. “We don’t see any imbalances that suggest anything is going to collapse.”

U.S. buyers continued a trend they’ve been following for years, purchasing SUVs and trucks and shunning cars. Car sales fell 13 per cent in June while trucks and SUVs rose four per cent, according to Autodata Corp. Trucks and SUVs accounted for 63 per cent of sales last month.

Sales of Toyota’s Camry, normally the top-selling non-pickup truck in the U.S., fell nearly 10 per cent. But Ford’s F-Series pickup, the top-selling vehicle in America, rose nearly 10 per cent.

Slowing car sales are good for consumers who are looking to buy a car, says Caldwell. Dealer inventories are growing before production cuts take effect and discounts are rising, so now is the time to buy.