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Susan Tompor: Pockets of angst — and higher interest rates — cloud picture for car sales

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Atlanta-based Cox Automotive is projecting that 16.7 million new cars and light trucks will be sold in the U.S. in 2018. That's down from 17.1 million vehicles sold last year.

Vince Audet, 44, who lives in Macomb Township, said after driving a Dodge Journey for nine years and 200,000 miles, he decided to get a 2018 Dodge Ram and bought one last Friday.

He's leasing the pickup, which had a sticker price of about $50,000, for $325 a month. He had hoped to get an advertised deal of around $120 a month -- but he didn't qualify for a lease loyalty program, a military discount or other incentives.

Audet, who works as a manager in engineering at FCA's U.S. headquarters in Auburn Hills, said he was happy to hear Fiat Chrysler CEO Sergio Marchionne say at this year's auto show press preview that he has no intention of selling off the company in pieces.

"We're doing great," Audet said. "I'm feeling really good."

Yet some consumers with less job security and weaker credit may feel more compelled to buy a used car, instead of new.

"Credit is tightening at the same time interest rates are going up," Jonathon Smoke, chief economist for Cox Automotive, said in an interview at Cobo Center during press preview days at the Detroit auto show.

A subprime borrower -- defined as someone with a credit score below 600 -- taking out a new car loan was looking at an average rate of 15.91 percent in October 2016. But a year later, the average rate had climbed nearly a full percentage point to 16.84 percent, Smoke said.

On a five-year, $15,000 car loan, the monthly payment for the subprime borrower would be about $7 a month higher and around $371 a month at 16.84 percent.

Many subprime borrowers can no longer get car loans as credit tightens.

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