Pub. 5 Issue 3

23 Coronavirus and U.S. Auto Sales T he car industry, like the rest of the U.S., has been affected strongly by the Coronavirus as the entire country has shut down or restricted most in- person contact in a massive attempt to slow down the rate of new infections. On Monday, March 16, 2020, several au- tomakers said they have decided to give deferred payments to people who buy new vehicles. They will allow customers who have car loans already, and who have been affected by the shutdowns, the option of rescheduling their payments. Millions of U.S. employees and students are staying home and waiting out the virus. Although more than 4,100 people in the U.S. have been officially diagnosed with the Coronavirus, there may be many additional undiagnosed cases. That creates a challenge for dealerships whose showrooms and lots are suddenly empty of potential customers. The automakers are hoping to reduce some of the uncertainty for potential buyers by offering them increased options and flexibility. Until now, automakers and suppliers have been able to avoid production shutdowns in the U.S. They have either had parts that were on their way in the supply chain, or they were able to get air shipments from different plants. Analysts have already adjusted their sales forecast for the U.S. market because of the impact of the Coronavirus on sales. Adam Jonas, a Morgan Stanley analyst, wrote a research note March 11, 2020, saying that the company now expects auto sales to go down 9% this year. Up until the outbreak, however, the decline was expected to be 1-2%. Sales in 2019 were 17.1 million. The expectation now has dropped to a forecast of only 16.5 million. Automobile companies are adjusting accordingly. The credit unit at Ford Motor Co. has decided to allow customers who buy new vehicles to wait 90 days until their first payment is due. Nissan Motor Co. Ltd will offer a similar program. On Friday, March 13, 2020, Hyundai Motor Co. announced plans to defer payments for 90 days. Hyundai would also give six months of payment relief to customers who find themselves without a job. Ford, Nissan, General Motors Co. and Toyota Motor Corp. are making similar offers to customers affected by the virus. These offers include deferred lease payments and ex tensions. A representative for GM said that the company is working with customers on a case-by-case basis to defer payments and waive late fees. According to data from the New York Federal Reserve, customer car loans total $1.33 t r i l lion throughout the entire U.S., with $16 billion of that occurring in Q4 of 2019. U.S. auto loan growth has been steady since 2011. However, not everyone has been able to keep up with the required payments. More than 7 million people in the U.S. are behind on their car loans by 90 days or more. Borrowers with the lowest credit scores are most likely to miss payments. Having a car, however, is often the difference between keeping a job and losing it. As more and more businesses close, that means many people can’t earn money. These new programs will lessen the financial impact of that loss and perhaps give people the time they need so that they don’t end up losing their transportation in addition to the other potential losses, such as health and employment. 