Pub. 17 2018-2019 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 1 , 2 0 1 9 14 new jersey auto retailer After hitting rock bottom in 2009, the new retail light vehicle market entered a seven-year recovery that led the New Jersey market to near record-high levels. New retail registrations in the State increased from 359,000 in 2009 to just over 530,000 in 2016, an increase of nearly 50%. (See accompany- ing graph. Source for vehicle registration data is IHS.) Registrations declined 2.6% in 2017, before increasing slightly last year. Al- though the minor uptick in 2018 was somewhat unexpected, the sales pattern during the past two years has been consistent with Auto Outlook’s prediction. In early 2017, we thought the market would level off, and perhaps drift lower, but were confident that the volume of sales would remain high, when compared to historical norms. The question on everybody’s mind now, of course, is where the market will go from here. And the consensus among most in- dustry analysts and economists is that the industry is headed lower. Without question, there are some tangible signs pointing to a downturn. Here are what we believe are the two most perti- nent negatives for the outlook: • Vehicle affordability has weakened. Higher interest rates, rising vehicle prices, and less aggressive incentive of- fers have combined to increase the cost of monthly vehicle loan and lease payments. Although household income lev- els in New Jersey have improved, it has not been enough to offset the impact of higher interest rates and increasing vehicle prices. • Used and new vehicle price gap is widening. For most of this decade, tight supplies of late model used vehicles gave a boost to pre-owned car and truck prices. This helped keep the difference between new and used vehicle prices relatively small. But that dynamic is now changing. Several years of strong new vehicle sales and higher off- lease volumes are feeding used vehicle supplies, which will eventually lead to softening prices. This has contributed to a widening in the gap between the cost of new and used. As a result, an increasing number of automotive consum- ers will likely view the purchase of a used vehicle as an appealing proposition, which will syphon sales away from the new vehicle market. Some of the more pessimistic prognosticators consider the factors above, combine them with the potential impact of ride-hailing, and conclude that the new vehicle market is em- barking on a stretch of prolonged declines, with sales falling to levels seen in 2009. Auto Outlook doesn’t agree. There are The New Jersey New Vehicle Market Is Headed For A Slight Downturn BY JEFF FOLTZ