Auto dealers see slowing sales, sparking fears that a long-expected decline is here 

Key Points
  • Several auto dealerships are reporting a noticeable drop in retail sales and customer traffic in showrooms.
  • Analysts have been forecasting a downturn in sales as interest rates rise and more pre-owned cars with low mileage enter the used car market.
  • Despite these reports, Edmunds expects sales are on pace to hit 17 million vehicles in October.
  • Fleet sales could be a factor in maintaining growth at that level.
Keith Monnin, CEO of Bernardi Auto Group, looks over a dealership in Framingham, MA.
Suzanne Kreiter | The Boston Globe | Getty Images

A growing number of auto dealers around the country is seeing a noticeable drop in retail sales and customer traffic in showrooms, raising the possibility that a long-anticipated slowdown in auto sales has arrived.

"We are definitely seeing business pull back," said Scott Adams, the owner of a Toyota dealership in Lee's Summit, Missouri, just outside Kansas City. "September was off some, but this month our car sales are down 12 percent and our truck sales are down 23 percent."

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Other dealers tell CNBC they saw a significant drop in sales last weekend. One dealer in metro Tampa Bay, Florida, who asked not to be identified, said sales this month are down 13 percent.

"Customer traffic has moderated," said Mark Scarpelli, president of Raymond Chevrolet and Kia in Antioch, Illinois.

Scarpelli said sales at his dealership are "keeping pace" with last October, but he has seen customers taking longer before buying a new car or truck. "There is a little bit more of a pause because of the higher interest rates," he said.

Auto loan interest rates have moved steadily higher as the Federal Reserve has raised rates this year. In the second quarter of this year, the average new vehicle interest rate was 5.76 percent, up from 5.2 percent at the same time in 2017, according to Experian, which tracks millions of auto loans.

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Gary Barbera, who sells Jeep, Ram, Dodge and Chrysler models in Philadelphia, said his sales team has to "dig a little deeper" to close a sale. Still, business is up more than 6 percent this month, he said.

The pace of auto sales for October is expected to be close to 17 million vehicles, according to the auto website Edmunds.

Jeremy Acevedo, Edmunds' manager of industry analysis, said the number might not be showing signs of weakness due to auto fleet sales. If automakers increase fleet sales to corporations and government agencies, it would offset weaker retail sales through dealerships.

For more than a year, analysts have said auto sales are primed to slow down for a variety of reasons, including a surge in 3-year-old models entering the used car market. That wave of pre-owned models with relatively low mileage gives potential buyers an attractive option at a far lower price. Still, auto sales have remained robust and are on pace to top 17 million vehicles for a fourth-straight year, which would be a record for the industry.

Dave Fischer, chairman and CEO of the Suburban Collection, which has more than 50 retail stores in Michigan, California and Florida, said if sales slowing around the country, he's not seeing it.

"We will be up over last year. People are still buying," he said.

—CNBC's Meghan Reeder contributed to this report.

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