October Auto Sales Down on Rising Interest Rates and Higher Costs

​According to October projections from Edmunds and Cox Automotive, auto sales declined 2.1% and 1.9%, respectively. Fiat Chrysler, Toyota, Subaru, Volkswagen and Kia registered sales increases, while Ford, Honda, Nissan, and General Motors posted declines for the month. 

A strong economy, supported by low unemployment and rising wages, is keeping auto sales at relatively high levels. However, the trend is headed downward, as interest rates are rising and operating costs are swelling. Edmunds reports that interest rates on new vehicle loans averaged 6.2% in October, up 1.3% from twelve months prior. Interest rates may continue to rise, as the Federal Reserve has noted intentions to increase rates further in the future. Furthermore, trade tensions and the resulting tariffs have driven operating costs up for auto makers. Imported car parts are more expensive, as well as costs of finished autos from foreign producers, leading to a 3% year-over-year increase in price.
 
Operating costs are rising for the consumer as well, shrinking consumers’ appetite for new car purchases. According to Automotive Fleet’s 27th annual operating cost survey, costs have increased for the first time in five years, as fuel prices have led cost increases at the pump and for new tires (crude oil costs in tire production). Maintenance costs have increased as well due to a tight labor market.