Heading into 2018, vehicle prices were at record highs, interest rates were rising and Americans increasingly were rejecting the traditional family sedan. So U.S. auto sales appeared headed for a second-straight annual decline. But it hasn't played out as expected: Sales have remained steady even as incentives were disciplined and prices rose further.
Eleven months into 2018, U.S. auto sales rose 0.4 percent from the same period last year. They are on track to finish above 17 million vehicles for a fourth-straight year.
"Anytime you're in an environment where you're selling 17 million units, things are going great from a sales standpoint," Eric Lyman, ALG's chief industry analyst, told Automotive News.
The surprisingly strong year got a boost from better-than-expected November results, which slipped 0.5 percent but exceeded analysts' expectations for a drop of more like 2 percent. The seasonally adjusted, annualized selling rate for November hit 17.55 million, down from 17.65 million a year ago.
Last year's U.S. auto sales totaled 17,238,905. So far, 2018 appears on pace to beat that. Sales totaled 15,695,288 through November, and thus 1,543,618 units need to move in December to do so. For the three prior Decembers, U.S. light-vehicle sales ranged from 1.6 million to almost 1.7 million.
In the decade before the Great Recession, sales were propped up by big incentives that cut into profits but avoided costly layoffs. Not this year.
In November, the average transaction price for a new light vehicle rose 1.7 percent year-over-year to $34,438, according estimates from TrueCar's ALG. At the same time, average incentive spending per vehicle decreased by $131 to $3,672. That means incentives averaged 10.7 percent of the transaction price, down from 11.2 percent a year earlier.
Still, there are headwinds.
Average annual percentage rates on new-vehicle sales dropped to 6 percent in November from 6.2 percent the month before, according to Edmunds. But that relief is likely temporary — thank you, Black Friday discounts! — Edmunds said, noting that the average APR in November 2017 was 4.8 percent.
"An average interest rate above 6 percent is still a tough pill to swallow, especially for shoppers who might be coming back to the market after a number of years," Jeremy Acevedo, Edmunds' manager of industry analysis, said in a statement. "Shoppers who purchased a car in November five years ago could feasibly be facing a 47 percent increase in their interest rate this November."
Edmunds said 0 percent deals represented just 5.5 percent of all vehicle sales financed at a dealership — the lowest November level since 2005.