Rising Car Prices Could Mean Stalling Sales for Automakers

For automakers, pre-pandemic sales highs might be in the rearview mirror.

As The Wall Street Journal (WSJ) reported Tuesday (Oct. 1), the steep price of new vehicles and elevated borrowing costs have left consumers hesitant, suggesting that 2024 could be another year of lukewarm sales for car companies.

Most major automakers are set to report quarterly earnings Tuesday, and industry forecasts expect sales to be flat compared to last year, the report said, with car companies potentially on track to finish 2024 with U.S. vehicle sales of about 15.7 million.

Compare that to the five years leading to the pandemic, when carmakers enjoyed sales of at least 17 million vehicles. Now, cars are less affordable, the report said, with the average new vehicle selling for $44,467 in September, a figure that’s nearly $10,000 higher than in 2019.

Those prices are an unwelcome surprise for car-buyers who may be seeking a new automobile for the first time since COVID, Jessica Caldwell, head of insights at online car-shopping marketplace Edmunds, told the WSJ.

“This market is still pretty unaffordable,” she said.

The situation has left consumers seeking more affordable vehicles, such as smaller cars and SUVs, leading to a drop in sales of midsize cars, trucks and larger SUVs.

“I don’t think that people really want these teeny, tiny vehicles, but it’s what they can afford right now,” said Cox Automotive Senior Economist Charlie Chesbrough.

The question of what consumers will be able to afford moving forward is still up in the air, as noted here last week when The Conference Board released its monthly consumer confidence index data. While it showed a steep decline in consumer confidence, the data also showed a slight improvement in plans for major purchases, such as homes or new cars.

“The read across here is that the Fed’s most recent rate cuts may spur at least some near-term consideration of opening the proverbial wallets,” PYMNTS wrote.

“But those expectations may be tempered a bit when surveying the jobs market. As many as 18% of consumers expected their incomes to increase, down from 18.6% in August.  And13% expected their incomes to decrease, up from 11.7%.”

Meanwhile, some car sellers are adjusting to the changing landscape, with used car digital marketplace Vroom announcing last month that it had concluded the wind-down of its eCommerce and used vehicle dealership operations.