UsedCarNews.com
November 19, 2018
Election’s Over, But Uncertainty Remains By Ted Craig
Now that the election is over, many pundits expect the economy to inish the year strong due to the release of pent-up demand. But economists who follow the car business warn against high expectations. George Hofer, an economist at the University of Richmond, doesn’t expect the auto market, or any other consumer market, to be afected. Hofer reasons that few consumers delayed purchases due to political uncertainty. Charlie Chesbrough, Cox Automotive’s senior economist, said vehicle sales have been humming along despite the election and other numerous challenges. “Everything says the market should decline, but the numbers just aren’t there,” Chesbrough said. These challenges include a turbulent stock market and higher gas prices. But the biggest is the everincreasing cost of new vehicles. The average new-car transaction price was $37,007 in October, an increase from $35,889 in October 2017. Part of the reason new cars cost more now is a lack of incentives. JD Power reports that October saw lower incentive spending for the fourth consecutive month, relecting the irst sustained decline in spending since the recession. It’s more than a lack of cash incentives slowing new sales. Edmunds reports that zero-percent inance loans in October fell to their lowest level since 2007. That is good news for used car sales, as consumers chose the lessexpensive option. But used-car prices are also high. The average used-vehicle retail price reached $20,084, the highest since 2005, according to Edmunds. On the wholesale side, the Man-
heim Used Vehicle Value Index reached a new high of 140.9 in October. The Index’s growth is slower, however, and Chesbrough expects more moderation going forward. The main reason is the coming peak in of-lease vehicles. And now the mix of units coming back to the wholesale markets better matches consumer demand, meaning lower SUV prices at auction. One worry for the industry following the elections is a return of regulation. In the past year, the Republicancontrolled Congress struck down several measures from the Bureau of Consumer Financial Protection that the industry opposed, including a ban on arbitration agreements. That was when the key Housing Financial Service Committee was chaired by Jeb Hensarling, a vocal critic of the CFPB. The likely incoming chairwoman, Maxine Waters, has said publicly that she wants to re-establish the regulator’s authority, including chaning its name back to the Consumer Financial Protection Bureau. How much sway she will have with the regulator is unclear. Hofer said concerns about a rollback in regulation are likely unfounded, however, since they will have to get through the Senate and then get signed by the president. Hofer said a bigger challenge for next year related to polictics might be the size of income tax refunds. It is possible that many people saw their withholdings reduced by an amounbt greater than the decline in the tax liabilities. This means that many could receive a refund lower than they expected, making it more diicult for them to put a down payment on a new vehicle or catch up with the payments on one they already have.
Photo by The Associated Press VOICE OF THE PEOPLE: A voter casts her ballot at a car dealership, one of many pressed into service in some areas. The election created economic uncertainty, but didn’t dampen car sales. Other factors will play a part going forward.
Rush - Dated Material
Still using book values?
DON’T SETTLE FOR LESS THAN LIVE Turn to the back cover to learn more.