Sales off to weakest start in 5 years

U.S. light-vehicle sales are off to the slowest start for a year since 2014. February sales declined 2.9 percent to 1.27 million vehicles, and the industry's annualized selling rate fell to its lowest level in 18 months.

Cox Automotive had projected a slight increase last month but said the factors it based that on — a generally buoyant economy and pent-up demand after frigid weather and a government shutdown in January — did not boost demand as much as anticipated. And two consecutive declines to start 2019 doesn't bode well for the rest of the year, said Cox senior economist Charlie Chesbrough. "There are two data points now to suggest this market is weakening at a significant pace," Chesbrough said.

Year to date, sales are down 2.6 percent, the biggest decline for the first two months of a year since 2009. The industry posted declines for January and February in 2018, 2017 and 2014, but only in 2017 did that lead to a decrease in full-year sales.Tyson Jominy, managing director of J.D. Power's PIN consulting group, said that while the first two months of the 2019 have been slow, January and February represent the slowest two-month stretch of the year for auto sales. "It is a bit like preseason football," Jominy said. "It does kind of give us an indication of things, but the industry doesn't really get going until March."

One factor analysts are watching in March is whether declining tax refunds could affect sales. Tax reform legislation has led to some consumers getting lower refunds than they are used to. Jominy said tax refund-driven sales typically begin in February and continue into March.

Otherwise, economic factors including the stock market and consumer confidence remain generally positive. Incentive spending was expected to be down on an annual basis for an eighth-straight month in February, according to J.D. Power. "So it's not all doom and gloom," Jominy said.

ALG had forecast that average incentive spending per vehicle in February was down 0.8 percent from a year ago, to $3,653. But that represented a 3 percent increase from January.

Meanwhile, rising vehicle prices and interest rates are expected to continue weighing on sales in 2019. ALG forecast the average transaction price for February at $34,565, up 3 percent from a year earlier. Edmunds said the annual percentage rate on financed new vehicles grew to an average of 6.26 percent last month, compared to 5.19 percent in February 2018.

"Shopping conditions are pretty unfavorable for consumers across the board, and even those with good credit are having trouble finding compelling finance offers," Jeremy Acevedo, Edmunds manager of industry analysis, said in a statement. "As rising vehicle costs and interest rates continue to compromise affordability, more shoppers might find themselves priced out of the new vehicle market."

Those shoppers could find plenty of inventory on the used side. Chesbrough noted that lease maturities, which have an increasingly favorable mix of SUVs and crossovers, should peak in 2019 and total some 4.1 million vehicles. That will put further pressure on new-vehicle sales, he said.

In February, the seasonally adjusted, annualized selling rate declined to 16.61 million, according to the Automotive News Data Center. That compares to 17.08 million a year ago and 16.9 million in January. It was the lowest since the August 2017 rate of 16.58 million.

Most automakers posted declines from February 2018, led by drops of 12 percent for Mercedes-Benz and 12 percent for Nissan Group.

In contrast, sales rose 3.9 percent for Subaru, 4.4 percent for Hyundai-Kia and 29 percent for Jaguar Land Rover. It was the fourth consecutive month with increases for Hyundai-Kia and Jaguar Land Rover and the 86th straight gain for Subaru.

General Motors sales were down an estimated 5.3 percent. Ford Motor Co.'s sales fell 4.4 percent amid soft car sales and a 3.1 percent decline for its F-series pickups. GM and Ford no longer report sales results monthly, opting instead to do so quarterly.

Sales by FCA US were off 2.3 percent last month, with Ram's 24 percent sales growth offset by declines for all other brands.

Toyota Motor North America's sales fell 5.2 percent, as a 4.4 percent rise for the Lexus brand was not enough to overcome weak sales of cars and some of its light trucks.