Report: Auto Demand Will Drop in 2018 Amid Interest Rate Hike

Citing a variety of factors, many experts say the automotive market in the U.S. has cooled after so many years of growth. Once the final numbers come in, 2017 sales are expected to drop to 17.2 million vehicles, the first decline since 2009. Unfortunately, the trend should continue this year as the Feds increase interest rates once again, Bloomberg reports.

The Federal Reserve anticipates three rate hikes this year after bumping up rates three times in 2017. Although the move should help prevent high inflation, it will also make it more expensive for consumers to finance a new car. According to Cox Automotive’s chief economist, Jonathan Smoke, higher interest rates are starting to lure more buyers toward used vehicles.

Automakers will release final sales numbers tomorrow. All major manufacturers are expected to report declines, however. Back in 2016, auto sales reached 17.5 million vehicles, marking the seventh straight year of growth. In 2018, analysts are predicting sales may fall to around 16.7 million vehicles.

But many factors are at play. Costs could increase depending on the outcome of talks surrounding the North American Free Trade Agreement. However, President Trump’s tax bill may help counteract some of the effects of interest rate hikes this year and keep consumers buying new cars, Smoke pointed out.

Source: Bloomberg

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