U.S. sales of new vehicles — largely trucks and SUVs — rose slightly in 2018, defying predictions and highlighting a strong economy.
Automakers reported an increase of 0.3% over a year ago to 17.27 million vehicles.
The increase came despite rising interest rates, a volatile stock market and rising car and truck prices that pushed some buyers out of the new-vehicle market.
Industry analysts and automakers said strong economic fundamentals pushed up sales and should keep them near historic highs in 2019.
“Economic conditions in the U.S. are favorable and should continue to be supportive of vehicle sales at or around their current run rate,” Ford Chief Economist Emily Kolinski Morris said after the company and other automakers announced their sales numbers Thursday.
That auto sales remain near the 2016 record of 17.55 million is a testimonial to the strength of the economy, said Mark Zandi, chief economist at Moody's Analytics. The job market, he said, has created new employment, and wage growth has accelerated.
“That's fundamental to selling anything,” he said. “If there are lots of jobs and people are getting bigger paychecks, they will buy more.”
The unemployment rate is 3.9% percent, up only slightly from the 49-year low of 3.7% recorded in September. The economy is thought to have grown close to 3% last year, its best performance in more than a decade. Consumers, the main driver of the economy, are spending freely. The Federal Reserve raised its key interest rate four times in 2018 but is only expected to raise it twice this year.
Auto sales also were helped by low gasoline prices and rising home values, Zandi said.
It all means that people are likely to keep buying new vehicles this year even as they grow more expensive. The Edmunds.com auto-pricing site estimates that the average new vehicle price hit a record $35,957 in December, about 2% higher than the previous year.
It will be harder for automakers to keep the sales pace above 17 million because they have been enticing buyers for several years now with low-interest financing and other incentives, Zandi said. He predicts more deals in the coming year as job growth slows and credit tightens for higher-risk buyers.
Edmunds predicts that sales will drop this year to 16.9 million. Senior Analyst Jessica Caldwell says leases will expire on more than 4 million vehicles, putting more people into the market for new vehicles but also adding an abundant supply of late-model used vehicles. It's too early to tell if more people will opt for used cars, trucks and SUVs, she said.
“They may be priced out of the market,” she said. “Interest rates and purchase prices are higher.”
Auto interest rates averaged around 5.6% last year, up from 4.8% in 2017, she said.
The massive shift from cars to trucks and SUVs continued last year. Cars made up only 32% of sales, while trucks and SUVs were 68%.
Here's how major automakers fared in sales last year compared with 2017: