Hawaii auto sales plunged 12.6 percent in the third quarter and are skidding toward their worst performance since 2015 as consumers flock to more affordable used vehicles amid rising interest rates.

New-vehicle registrations fell 5.4 percent through the first three quarters of this year and are projected to finish the year down 3.4 percent, according to a new quarterly report released by Hawaii Auto Outlook. It would be the state’s first decline after seven consecutive years of gains.

Even though the average age of vehicles on the road exceeds 10 years, consumers are being lured by the widening price gap between used and new vehicles, according to Jeff Foltz, editor of Hawaii Auto Outlook. He said for most of this decade, tight supplies of late-model used vehicles gave a boost to pre-owned car and truck prices and helped keep the difference between new and used vehicle prices relatively small.

“But that dynamic is now changing,” said Foltz, who produces the report for the Hawaii Automobile Dealers Association. “Several years of strong new-vehicle sales and higher off-lease volumes are feeding used vehicle supplies, which will eventually lead to softening prices. This has contributed to a widening in the gap between the cost of new and used. As a result, an increasing number of automotive consumers will likely view the purchase of a used vehicle as an appealing proposition, which will siphon sales away from the new-vehicle market.”

He said rising interest rates also could affect auto sales.

“After several years of hovering near zero, interest rates are on the rise,” Foltz wrote. “It’s not going to be an abrupt, upward march, but borrowing costs are almost certain to increase over the next 12 to 18 months. Higher interest rates lead to increased monthly finance and lease payments, which put a drag on new-vehicle sales.”

Hawaii is now forecast to end this year with 57,100 registrations, down from 59,137 in 2017, 58,485 in 2016 and in line with the 57,094 registrations in 2015, according to the report.

Despite the downturn, Foltz said positive economic growth, a strong labor market and robust consumer confidence should provide a catalyst in keeping state new-vehicle registrations at healthy levels. In 2010 the number or registrations totaled just 32,649.

“Today’s new cars and trucks are far superior to the average 10-year-old vehicle,” Foltz wrote. “Advanced safety technologies, which were once expensive options exclusive to luxury brands, are now standard features on many mass-market vehicles. In addition, an ever-expanding array of new products fulfilling every conceivable market niche and powertrain type will continue to entice consumers into the new- vehicle market.”

While new-vehicle registrations can be representative of auto sales, the two don’t always align because a buyer can purchase a vehicle one month and register it in another month. The data are based on county Department of Motor Vehicles registrations.

There were 43,210 registrations in the first nine months of the year compared with 45,699 in the year-earlier period. Numbers were mixed among the islands. Kauai registrations were up 2.8 percent, and Hawaii island registrations edged up 0.5 percent. But Maui registrations were down 8.4 percent, and Oahu registrations were off 6.5 percent.

In the third quarter alone, statewide registrations fell to 13,952 from 15,959.

Hawaii’s slowing vehicle market is following the national trend, which saw new registrations drop 0.7 percent through the first nine months of 2018.

The light-trucks category, which includes vans, SUVs and pickups, continued to gain in popularity over cars in Hawaii during the first nine months of 2018 despite regular gas prices increasing more than 50 cents statewide from the year-earlier period. The market share for light trucks through September was 67.5 percent with cars at 32.5 percent. Compact SUVs now account for 16.7 percent of the state market with the Honda CR-V the best-selling compact SUV with a market share of 20.8 percent.

Light trucks have exploded in popularity during recent years due to stable gas prices, which have spurred potential buyers to seek out vehicles with additional cabin room for passengers and storage, as well as a higher seat position that allows the driver to see the road better.

Toyota and Honda were the top two brands in Hawaii during the first nine months of the year with market shares of 26.9 percent and 15 percent, respectively. Nissan (9.4 percent), Ford (6.5 percent) and Chevrolet (6.3 percent) rounded out the top five.

The electric vehicle share in the state was 3 percent during the third quarter. The Toyota Prius and Nissan Leaf were the best-sellers through September in the combined new retail hybrid and electric vehicle category. The report did not break out the top hybrid/electric vehicles for only the third quarter.