Vehicle sales in March fell to the lowest level in more than two years, hit by factors including the widening price gap between new and used autos as well as rising interest rates and a slowing of the replacement cycle.
According to Autodata, vehicle sales ran at a seasonally adjusted annual rate of 16.62 million, down from 17.58 million in February. The annual rate reached 18.54 million in December and has fallen since.
The Autodata figures showed declines in the rates of both new car and light truck sales, foreign and domestic.
The decline in used-car prices is taking a toll. According to the National Automobile Dealers Association, used-car prices fell nearly 4% in February, as a glut of previously leased vehicles hit the market.
“From an industry perspective, we know that the used car price weakness does put some pressure on new vehicle sales,” said Emily Kolinski Morris, chief economist of Ford Motor Co.
, on a conference call. “Some of the factors that you mentioned, the spread between new and used vehicles is wider, it does effect trade-in values, and so could put some pressure on monthly payments as a result of the lower residual value along with the higher interest rates that I already mentioned.”
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The auto makers had also been getting a tailwind from people trading in the older cars that they had hung onto in the wake of the Great Recession. That may have run its course.
“I think, from our perspective, it’s a sign that we’re getting into a more normal phase of the industry, where it’s not entirely driven by replacement demand,” Morris said.
Auto makers have resorted to discounting aggressively. The average sales incentive topped $3,750 in March, according to research firm J.D. Power.
was the biggest loser among the S&P 500, and Fiat Chrysler
also dropped sharply.