March 20, 2018

Slow Housing Market Affects Auto Sales

Light vehicle sales could drop below 16 million next year as a slow housing market continues, according to billionaire auto parts investor Wilbur Ross. It’s anticipated to be the lowest tally since 1998.

Despite shrinking auto sales, Ross doesn’t see manufacturers discounting cars. Detroit automakers have reduced production in factories to decrease pressure to do discounts and to reverse compounding losses.

The deterioration of the housing market has a lot of home owners upside-down on their mortgages, limiting their ability to purchase new vehicles. Add in skyrocketing gas prices and many households probably won’t be able to afford a new 2008 model car. It’s a catch-22 for some consumers: newer cars are more fuel-efficient and can save in gas costs. But higher insurance rates and car payments on new cars could offset any savings on gas.

I can especially see how the dropping housing market could affect car sales in Southern California. Housing sales have slowed considerably and consumers are trying to keep up with first, second, and even third mortgages and high property taxes. That doesn’t leave much room for new cars (and related expenses) for some families.

I’ll watch with interest next year to see if these predictions come true, or whether families will continue to put themselves further in debt to have the increasingly elusive “American Dream.”

Source: Reuters

Speak Your Mind