As interest rates rise, subprime buyers put brakes on US auto sales
Despite a slight uptick in March, sales are expected to fall for second consecutive year
Subprime buyers in the US have suddenly stopped shopping for new cars, research shows, shedding light on prospects for an already faltering market.
Purchases of new autos among those with subprime credit scores plunged almost 10% in the first two months of the year, Bloomberg reported Monday, citing a report from JD Powers.
“There’s not a bubble of subprime. But as interest rates rise, it’s going to affect” those customers first, the senior vice-president of US sales for Nissan, Dan Mohnke, was quoted as saying. “That’s the part of the market that’s really coming down.’’
The development further highlights the accelerating wealth gap, with the market for luxury models continuing to grow. Sales of vehicles priced at US$40,000 and above rose by 4%, while cars at less than $20,000 dropped by almost 20%, according to the research.
Overall sales for March were projected to rise by 0.4%, year over year, according to Reuters, but analysts attributed the increase to an extra weekend in the month over 2017 as well as increased consumer discounts.