When Jonathan Smoke, Cox Automotive's chief economist, joined the auto industry from the housing market two years ago, there was talk that the return of off-lease vehicles would upend used-vehicle prices to the point of triggering the next economic downturn.
Similar to the housing bubble, the prevailing theory was that the tsunami from peak leasing volume in 2016 returning to market would crash used-vehicle values.
Smoke was skeptical.
"I was like, 'Come on,' " he told Automotive News in January. "First of all, that's not right on the lease volumes. [Used-vehicle] demand might more than make up for that."
Besides, Smoke said, an automotive downturn wouldn't be nearly drastic enough to cause problems for the entire financial system. The housing market represents 18 percent of the U.S. economy, Smoke said, while the manufacturing, financing and retailing of new vehicles comes to slightly more than 3 percent of the economy.
As predicted, demand for used vehicles rose to meet the supply surge, and the downturn hasn't come.
Economists and analysts predict a downturn in the next year or so, though there's little consensus on the degree. For the auto industry, if a strong U.S. economy with low unemployment rates persists, the anticipated wane in demand on the new-vehicle side will resemble previous downturns. New-vehicle sales are expected to decline nearly 3 percent in 2019, based on the average of 11 early industry forecasts tracked by Automotive News.
But with a potentially catastrophic tariff scenario on the table, an auto-triggered downturn doesn't seem so far-fetched. If new-vehicle sales decline by more than 4 million units, that downturn becomes a nosedive, Smoke said.