With every great sales boom, comes the bust. Auto sales going bust won’t happen anytime soon; however, there is a slowdown coming. According to a new report from CNBC, U.S. auto sales are beginning to fall as new-car prices continue to climb. Not only are those higher prices squeezing out those with less-than-stellar financial situations, but those who are financing cars are also borrowing more, too.
Auto sales are expected to drop nearly 2.5 perfect this quarter, according to CNBC, which cited J.D. Power and LMC Automotive as the source of the data. That’s about 4 million fewer cars than the year prior. Retail sales, which exclude rental and fleet sales, are expected to drop about 5 percent to 2.9 million, according to the publication. It’s the first time in six years when retail car sales fell below 3 million units, according to senior vice president of J.D. Power’s data and analytics division.
While the economy continues to chug along, there are looming clouds that could rain on the whole auto sales parade. Last year, auto loan defaults started to rise, hitting the highest point since 1996 and continued to rise as auto-loan delinquencies of 90-plus days hit 7 million Americans. Used car sales jumped as the price of new cars skyrocketed while zero-percent interest loans for cars began to disappear.
Automakers are getting cautious about the future. Industry veterans know the automotive industry is cyclic. Sales will grow, then they’ll contract. Right now, sales of sedans are crashing as consumers move to roomier options like crossovers, SUVs, and trucks thanks to a plethora of credit and extended loan terms. Companies like General Motors are trying to get out ahead of the slowdown and prepare for the next auto sales boom. That’s why the automaker is making changes now—investing in electric and autonomous vehicles, cutting sedan production, and building more crossovers, trucks, and SUVs that earn higher profits, which GM will use to subsidize development of EV and self-driving technologies.