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Jonathan Smoke speaks at Automotive News World Congress

Watch payments, not unit sales, economist says

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Article Highlights

  1. The auto industry counts vehicle sales each month as a gauge of consumers' economic health, but tracking vehicle buyers' monthly payments may provide a better assessment, said Jonathan Smoke, chief economist at Cox Automotive.
  2. The auto industry operates in cycles, so even though lenders have been tightening their credit standards, some industry watchers are bracing for the next recession.
  3. "A lot of people are nervous, but when you look at the fundamentals, the probability of a recession in 2018 is as low as it's been in this entire recovery period," he said. "There's no reason to panic just yet."

DETROIT — The auto industry counts vehicle sales each month as a gauge of consumers’ economic health, but tracking vehicle buyers’ monthly payments may provide a better assessment, said Jonathan Smoke, chief economist at Cox Automotive.

Moreover, the importance of the payment can be seen in the sales process, he said: Customers are frustrated when they can’t know their monthly payment from the beginning of the transaction.

Given “the importance of financing [and] the negative headwinds on the credit side, I think the payment is going to tell you a lot more about how healthy your consumer segment is and whether or not you’re going to have challenges in the year ahead with credit tightening and interest rates going up,” Smoke said this month at the Automotive News World Congress and on the sidelines of the Detroit auto show.

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