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Friday January 19th, 2018 10:14PM

Auto sales, believed to have dropped in 2017, remain strong

By The Associated Press
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DETROIT (AP) — The U.S. auto industry's historic growth streak may be ending, but demand for new cars and trucks remains healthy as the new year begins.

U.S. sales of new vehicles are expected to fall 2 percent to 17.1 million in 2017, according to Kelley Blue Book. That would be the first year-over-year decline since 2009, ending an unprecedented seven-year expansion.

General Motors, Toyota and Ford all reported a 1 percent declines in sales last year compared to 2016. Fiat Chrysler's sales fell 8 percent. Honda's sales were flat, while Nissan's rose 2 percent. Volkswagen brand sales rose 5 percent.

While sales are likely to fall short of 2016's record of 17.55 million, 2017 is still expected to be the fourth-best sales year in U.S. history.

Analysts think sales will fall a bit further this year. While low unemployment and rising consumer confidence are expected to boost demand, rising interest rates could make it more expensive for people to finance new vehicles.

"That's real money to consumers," said Charlie Chesbrough, a senior economist with Cox Automotive, which owns AutoTrader.com and other car-buying sites.

Vehicles are also becoming more durable so many consumers aren't buying new ones, which further puts a drag on sales. The average age of vehicles on the road has climbed to 11.6 years, up from 8.8 years in 1998.

The growing popularity of leasing will have a big impact on 2018 sales. Almost one-third of new vehicle sales were leases in 2015, and many of those 4 million lessees will be trading in their vehicles for new ones, according to the car buying site Edmunds.com. (Edmunds regularly provides content, including automotive tips and reviews, for distribution by The Associated Press.)

But leasing also has a downside for automakers, since the influx of late-model used cars returning to the market will cut into sales of new vehicles.

Tax cuts also could be a mixed blessing. They will likely stimulate demand, particularly for commercial trucks and vans, Ford says. But the more the economy grows, the more likely it is that the government will raise interest rates, Chesbrough said.

Here are more details of December and 2017 sales:

—WINNERS AND LOSERS: Ford's F-Series pickup truck remained the best-selling vehicle in the U.S. in 2017, a title it has now held for 36 years. Ford sold 896,764 F-Series trucks in the U.S. last year, or nearly two trucks every minute. F-Series sales rose 9 percent for the year, in part because of post-hurricane demand in Texas and Florida. Car-heavy brands had the toughest time winning customers, who were flocking to SUVs. Chrysler, Dodge and Fiat all saw their sales drop by double-digit percentages. Toyota Prius hybrid sales plummeted 20.5 percent.

— LUXURY CROWN: Mercedes-Benz dethroned BMW as the best-selling luxury brand in the U.S. in 2016, and it's likely to hold on to that title in 2017. Through November, Mercedes had sold 332,990 vehicles; BMW was far behind, battling it out with Lexus for second place. But overall, some luxury brands were struggling. Cadillac and Lexus both saw their sales drop 8 percent last year; Lincoln sales plummeted 17 percent in December. Mark LaNeve, Ford's U.S. sales chief, said mainstream brands are getting so luxurious that many buyers don't feel the need to step up to a luxury label.

— PILING ON THE DEALS: New vehicle prices hit a record last year, averaging $36,113 as buyers bought bigger SUVs and added more safety and infotainment features, Kelley Blue Book said. At the same time, automakers piled on deals in order to juice sales and hang on to their market share. Last month, Chevrolet was offering up to $11,000 off on a 2017 Silverado pickup. Automakers spent an average of $4,302 per vehicle in incentives last month, passing the previous record set in November and $300 higher than last December, according to the consulting firm J.D. Power. Analysts say they're expecting a pullback in incentive spending this year as automakers cut back on inventory. But there will still be good deals, especially on slow-selling vehicles like midsize sedans.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Corporate News, AP Business - Economy
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