U.S. car sales are maintaining a strong pace for March, according to several mid-month reports.
New car sales have remained steady in March and are expected to increase by 8 to 10%, year-over-year, according to new estimates from J.D. Power and Associates.
Using data from a broad network of dealers, Power estimates both retail light-vehicle sales and the total light-vehicle rate are consistent with February’s strong performance market. That would work out to around 12.1 million vehicles by consumers and 15.3 million when fleet buyers are included in the mix.
Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles. They also tend to be more profitable than fleet sales, especially those to daily rental companies. Most makers have been shifting focus to the retail side of the market – in part because that also tends to prop up residuals, or trade-in values.
The outlook for 2013 remains strong and consistent with the pace expected to be set in the first quarter, according to LMC Automotive. The forecasting firm is holding its 2013 U.S. forecast for total light-vehicle sales at 15.3 million units and the retail light-vehicle forecast at 12.5 million units.
“Building on the current performance, we expect the economic environment to improve throughout 2013, as the likelihood of a dark cloud slowing the recovery pace diminishes,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “Consumers do not appear phased by headwinds from Washington, as growth in auto sales are outperforming earlier expectations.”
If anything, many automakers are struggling to meet this year’s strong demand, notably Ford, Hyundai and the Jeep side of the Fiat/Chrysler alliance. Strong sales have allowed manufacturers, on the whole, to trim incentives while also demanding higher prices. Totaling in both discounts and options, the so-called Average Transaction Price, the typical amount consumers are paying for a new vehicle, is up 3% from March 2012, to $28,504. Leases account for 23.1% of new-vehicle retail transactions in March 2013, up from 20.0% in March 2012.
In addition, the percentage of retail sales financed with a 72-month or longer loan is at record levels, reaching 32.1% in March 2013, an increase from 30.4% in March 2012.
“While longer loan terms have traditionally been a cause for concern to the industry due to the risk of purchase cycle extension, it is not necessarily as daunting as it may seem.” said John Humphrey, senior vice president of the global automotive practice at J.D. Power and Associates. “The longer loans are being offset by more leasing and the low interest environment, which means that consumers are able to put more of their monthly payment towards their loan principal rather than interest fees.”
Humphrey also noted that strong used-car values mean that consumers have more equity in their trades and can finance lower amounts. In addition, consumers who may have been shut out of the market in recent years are finding that a longer loan makes buying a new vehicle affordable.
Vehicle production in North America is up 3% through February 2013, compared with the same period in 2012. Production of models in the compact segment is outpacing the total market, up 7% thus far in 2013.
Production of vehicles in the midsize and large segments has increased 1% and likely will hold in a slower growth position as General Motors readies the ramp-up of its redesigned large pickups. Production of compact cars and compact premium CUVs is up 15% in the first two months of 2013, driven by the addition of the Dodge Dart, Nissan Leaf and the redesigned Acura RDX.
Vehicle inventory levels in early March declined to a 64-day supply, compared with 74 days in February. Overall, there are nearly 3.2 million units currently available on dealer lots or in transit–an increase of approximately 600,000 units from March 2012. Both car and truck inventories have dropped approximately 10 days from last month. Cars began March with a 61-day supply and trucks with a 68-day supply.
LMC Automotive’s forecast for North American production remains at 15.9 million units for 2013, an increase of 3% from 2012.