DETROIT — High prices and high monthly payments have Peter Welch, CEO of the National Automobile Dealers Association, concerned about the economics of the light-vehicle market, especially given the potential impact of federal fuel economy regulations and Trump administration tariffs targeting imports.
Affordability is "probably the biggest thing" he is worried about, Welch said last week at the Automotive News World Congress here. Welch said new-vehicle retail prices are hitting an all-time high, with average monthly payments following suit. Interest rates are going up, too, and loan terms are longer than ever. And the number of vehicles delivering $1,000-a-month payments has never been higher, he said.
"People buying $55,000 pickup trucks with $1,000-a-month payments — I've never seen it," Welch said. "A lot of people don't think that's sustainable."
Welch said most of the customers at NADA's 18,500 rooftops aren't affluent — they're single moms buying used Toyota Corollas, for example.
While stressing that he's not taking a position on the government mandating things such as fuel economy standards or new safety features, "they all come with a price," he said. He added that new-vehicle prices appear headed toward $40,000 with $800 monthly payments.
"That is going to put a giant dent in the SAARs and it almost makes me wonder if at some point we're going to see another Henry Ford" stepping into the void to offer basic, affordable vehicles, Welch said.
From a business perspective, he said, the Trump administration's tax cuts have been well-received. But tariffs remain a concern. "The stakes are very high for everyone in this room," Welch said.
The NADA's import-focused dealers, in particular, "will not be able to survive ... with a $1,000 tariff on a car," he said.
Looking ahead, NADA is forecasting 16.8 million new light vehicles to be sold in 2019, down from 17.3 million in 2018. But Welch noted there are several positive economic indicators, such as high employment rates, a solid gross domestic product and a healthy economy overall.
"I don't know why we can't have a few more good years on a plateau," Welch said. "I'll take a plateau between 16.5 million and 17 million for as long as we can get them."