The sudden slowdown in vehicle sales in March may be due to a tightening by lenders who are leery of the spike in auto loan delinquencies. These defaults have been on the rise in all categories. While they rose consistently in the second half of 2016, they spiked in the first quarter of 2017.
While much of the focus has been on delinquencies by subprime customers, the trend is hitting even buyers with solid credit. This has led to stiffer loan standards, which has an ripple effect on consumer demand.
Compounding the problem is the glut of vehicles on dealer lots, especially for used cars. The excess inventory is leading to deeply lower prices, which in turn cuts into dealer profits.
Experts are concerned that the sales slowdown will continue and that it will have a negative effect on the broader economy. For the moment, analysts are seeing this as a blip on the radar and not as a trend. However, if car sales have truly peaked, there could be a dip in sales for related industries like auto parts, trade and transportation. This could fuel a drag on the entire U.S. economy.
Let us know! Are you seeing a slowdown in sales and loan approvals on your lot?