JD Power Outlines Worrisome Trends In The Auto Industry

JD Power executives warn that the long-term health of auto loans may be a concern

JD Power Outlines Worrisome Trends In The Auto Industry
April 11, 2016

At the 2016 JD Power Automotive Summit held in Las Vegas, executives spoke out about concerning trends in the auto industry. The summit is the opening meeting of the yearly National Automobile Dealers Association Convention & Expo and serves as a platform to discuss concerns voiced by leaders in the industry. One of these concerns was the fact that while overall auto sales are still climbing, extended loan terms may indicate that the industry is headed for a crash.

The summit focused on four different points. The first was positive: sales in 2015 reached 14.2 million, a number not seen since 2004. Many expect 2016 to improve on that number. The second point was that promotional incentives for consumers are rising. Currently, the average amount of incentives is 9.6 percent of the manufacturer’s suggested price, which is reaching what some see as a dangerous amount. During the height of the recent recession, incentives had risen as high as 11.1 percent. If broken down into categories, the amount of incentives on cars has already topped that amount with 12.3 percent. Trucks, on the other hand, bring down the average by boosting a low 8.2 percent of the manufacturer’s price.

The other two points at the summit were even more concerning: a full third of all auto loans are now for 72 months or more, with 5.4 percent being 84 months or more. Buyers' credit scores are also lower, with 17.6 percent of all buyers having a score below 650.

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