Sales Forecasts

January used sales could jump nearly 8%

CARY, N.C. - 

While multiple projections have new-vehicle sales off to a somewhat sluggish start, the forecasts for used-vehicle sales in the opening month of 2017 offer much more upbeat expectations.

Edmunds estimated 3.1 million used vehicles will be sold in January, which could computed into a seasonally adjusted annual rate (SAAR) of 38.4 million. Both of those metrics are higher compared to 2.6 million sales or a SAAR of 38.2 million that Edmunds reported for December.

Meanwhile, the used-sales forecast from ALG is even more hopeful. Analysts there said total used auto sales — including deliveries at franchised and independent dealerships as well as private-party transactions — may reach 3,139,957 this month. Should the industry hit that mark, it would represent a 7.9-percent lift versus January of last year.

Conversely, here is the rundown of new-model sales expectations for the month.

Edmunds forecasted that 1,153,459 new cars and trucks will be sold in the U.S. in January, for an estimated SAAR of 17.7 million. This expectation reflects a 31.5-percent drop in sales from December and a 0.7-percent dip from January of last year.

“January had the potential of being a very slow month at dealerships, given the fact that auto sales shattered records in December,” said Jessica Caldwell, Edmunds executive director of industry analysis.

“But January is shaping up to be a surprisingly healthy month. The economy continues to show signs of strength and consumers are feeling confident, boosting auto sales above initial expectations,” Caldwell added.

Over at ALG, its new-vehicle sales prediction carried similar themes.

ALG projected total new-vehicle sales, including fleet deliveries, will reach 1,130,500 units in January, down 1.5 percent from a year ago. The forecast would leave this month’s SAAR at an estimated 17.5 million units for the month, down from an 18.4 million-unit SAAR a year ago.

Excluding fleet sales, U.S. retail deliveries of new cars and light trucks should remain flat with 923,369 units, according to Eric Lyman, ALG’s chief industry analyst

“Exceptionally strong sales to close out 2016 led to a slow start in January, but additional incentives towards the end of the month helped pick up the slack,” Lyman said.

Lyman mentioned incentive spending by automakers averaged an estimated $3,635 per vehicle in January, up 21.6 percent from a year ago, and down 3.3 percent from December.

“On a year-over-year basis, Honda is gaining about 0.5 percent market share on the continued popularity of its new products in the compact utility and pick up segments,” Lyman said.

While the team at Kelley Blue Book doesn’t make used-vehicle sales predications, its analysts said new-vehicle sales are expected to decrease 3 percent year-over-year to a total of 1.13 million units in January, resulting in an estimated 17.4 million SAAR.

Kelley Blue Book senior analyst Alec Gutierrez acknowledged incentive spending is a concern as it continues to rise across the industry. Gutierrez explained another record in 2017 would likely require undisciplined sales tactics driven by incentives, leasing and longer loan terms. 

KBB’s new-model sales forecast 2017 calls for turns in the range of 16.8 to 17.3 million units, which would represent a 1 to 4 percent decrease from 2016.

“After a record December capped a new record year of vehicles sales in 2016, January figures appear to be enduring a hangover effect, potentially falling more than half a million units from the previous month,” Gutierrez said.

“However, January is typically the weakest month of the year for sales, as winter weather sets in and consumers recover from big spending over the holiday season,” he continued. “In addition, many potential sales were likely pulled ahead into December as consumers opted to take advantage of the ample inventory and incentives available industry-wide.”

Auto industry leaders predict 2017 used-car sales

CARY, N.C. - 

Used-car sales are predicted to do well in 2017, following what was a record year for used-car sales, according to two automotive industry leaders. 

In an AIADA AutoTalk webinar in late December,  KAR Auction Services chief economist Tom Kontos and David Lim — vice president and equity analyst at Wells Fargo Securities — discussed last year’s used-car sales and what to expect this year.

“It looks as if the cars that are coming back off lease, as repos, as trade-ins, as off-rental or as off fleet units are all finding a new home in the retail side of the business,” said Kontos. “Used-car sales through November, according to NADA data, for franchise dealers are up 3.6 percent; and for independent dealers, used-car sales are up 6 percent.

“So, the retail sales of used cars, if you combine those, they’re in the 4.2 percent range, which is pretty much exactly the rate of growth in supply (in 2016) at auction.”

Lim also agrees that used vehicles should do well in 2017. He said public auto dealers have been vocal about the opportunity in used vehicles, as many have launched standalone used-car outlets. 

“There’s definitely opportunity where you know these franchise dealers are going to get first dibs and in our view, I think having first dibs is actually a benefit for guys that also have standalone stores where they could feed those stores with the inventory,” he said.

They also touched on the certified pre-owned market.

Autodata Corp. reported that there were 2.64 million CPO sales in 2016, which was the sixth straight best-ever sum for this rapidly expanding market.

Lim said CPO programs are attractive and bring customers into the fold who can’t afford a brand-new luxury vehicle, but can purchase a CPO and maybe someday down the road buy the brand new version of their CPO vehicle.

“The impression that I have is that (2017) could be a pretty good year for used vehicles,” Lim said.

November likely to reach at least 2.8M used-car sales

CARY, N.C. - 

In a forecast released Tuesday, TrueCar projects close to 2.86 million used-vehicle sales this month, which would be a 6.1-percent year-over-year slide.

Last week, called for roughly 2.8 million used-car sales in November, which would be down from 3.1 million in October. The seasonally adjusted annualized rate for used-car sales, however, is likely to climb from 37.8 million to 37.9 million.

This follows a third quarter with 9.76 million used-vehicle sales, according to Edmunds’ latest Used Vehicle Market Report. That was up from 9.45 million in Q3 of 2015.

Franchised dealers accounted for 2.92 million used sales in the third quarter, Edmunds said, which was off 2.6 percent.

The National Automobile Dealers Association is forecasting 15.1 million used-car sales by franchised dealers this year, followed by 15.3 million used sales in 2017.

NADA also projects that there will be more than 40 million total used-car sales next year. 

11 findings from post-election shopper survey


CarGurus conducted a survey of more than 1,000 U.S. consumers to gather their opinions around how the recent presidential election will impact the automotive industry and their plans to buy a vehicle.

Overall, survey findings showed many expect both vehicle and gas prices to increase, and even more expect to see fewer government incentives for environmentally friendly vehicles, but that will likely not impact the decision to buy one.

CarGurus learned the following based on the presidential election results:

• 35 percent think auto prices will increase.

• 8 percent think auto prices will decrease.

• 57 percent think auto prices will stay the same.

• Almost half (46 percent) think gas prices will increase.

• Almost one quarter (21 percent) think gas prices will decrease.

• Almost one third (32 percent) think gas prices will remain the same.

In addition, the survey uncovered the following:

• 70 percent noted that the election will have no impact on their decision to buy a U.S. or foreign-made vehicle

• 75 percent expect to see fewer government incentives to buy efficient models like electronic vehicles and hybrids, and 25 percent expect to see more

When asked what impact a reduction in government incentives would have on the likelihood to consider purchasing an electric vehicle:

• 67 percent said it would not have an impact on their decision

• 17 percent said they would be much less likely to consider an electric vehicle

• 16 percent said they would be somewhat less likely to consider an electric vehicle

The CarGurus survey also found that younger respondents were more skeptical in their post-election opinions. They were more likely than older shoppers (ones 55 and older) to believe gas prices will increase, with 60 percent of 18 to 24 year olds thinking gas prices will increase as opposed to 44 percent of respondents aged 55 or older.

Additionally, almost 10 percent of younger shoppers also said they would delay decision to buy a vehicle and almost 10 percent of 25 to 34 year olds planning to spend less on the vehicle since the election.

“Our survey uncovered that while the election may have produced a level of uncertainty related to some issues like car and gas prices, others such as an affinity towards an electric vehicle remain largely unaffected,” said Sarah Welch, senior vice president of consumer marketing at CarGurus.

“It will be interesting to watch how this unfolds over the coming months and years, especially with the theme of financial prudence and caution coming from the younger generation,” Welch added.

The survey’s full findings can be found here.

‘Frozen out’ new small-car shoppers turn to used or stay home

CARY, N.C. - 

When it comes to smaller new-car segments, one of the trends at play in the slowdown is “an affordability issue,” says Autotrader senior analyst Michelle Krebs.

 “There are just many consumers who are being frozen out of the new-car market,” Krebs said during the Q&A portion of sales day conference call with the media on Tuesday. “And I think it’s having some impact, especially on that small-car market, because that’s where you’d typically see very budget-minded people going to.

“And people are keeping their cars longer, so it suggests that … consumers are challenged at that end of the market, too, financially,” she said.

So,  where are those would-be buyers who are “frozen out” going?  Are they turning to late-model and certified pre-owned, or perhaps heading toward independent dealer lots? Or are they out of the game altogether?

“We haven’t broken out who’s doing what, but we certainly think that it’s a factor, because wages have not gone up and yet prices of everything — health care, education, et cetera — have gone up, as have car prices,” Krebs said. “And so people are holding on to their cars longer.”

Citing Polk data, she said the average age of a vehicle on the road is 11.5 years old, adding that “despite record new-car sales, that’s gone up.”

“And we are seeing a robust used-car market. So they’re either not playing the game yet or they are buying used,” she said. “So, I think a lot of those might have been a possibility for the compact market, and they’re just frozen out.”




More Republican shoppers than Democrats to be impacted by election


With just saying the last names of the presidential candidates often triggering intense reactions, on Tuesday released results of its 2016 Election & Cars survey, revealing interesting findings that show the differences in how the two parties view aspects of the automotive industry.

When it comes to how the election might impact how dealers move metal, more than three-quarters of respondents (77.1 percent) said election results wouldn't likely have an impact on when they replace their car. Meanwhile, just over 16 percent said it could impact their decision, while under 7 percent said it would definitely have an impact, depending on the winner. 

That said, Swapalease noted that 25 percent of Republicans said the election could impact when they buy. 

Swapalease presented the online survey in front of 2,500 drivers across the U.S. during September. Of those participants, approximately 41 percent said they are registered Republicans, with 27 percent showing as Democrats.

While 68 percent were male and 32 percent female, two-fifths of survey takers (39 percent) said they were planning to vote for Donald Trump with 36 percent opting for Hillary Clinton.

When asked how long they typically keep their vehicles, both Republicans and Democrats picked between 21 and 36 months. However, roughly a third of women (32 percent) said longer than five years and 34 percent of men said between 21 and 36 months.

The majority of Democrat drivers (60 percent) said they’re most worried about high repair and/or maintenance costs when it comes to their vehicle. Most Republican drivers (58 percent) cited escalating costs of cars and trucks as their biggest concern.

Two-fifths of respondents said Volkswagen should be “ashamed of itself” over the scandal. However, many Democrats said they will never get another Volkswagen again; whereas more than twice as many Republicans said they wouldn’t want to fix the car’s issue.

Interestingly enough, when analyzed by gender, found that 42 percent of men said Volkswagen should be ashamed of itself,  and more than a third of woment (36 percent) weren’t aware of any scandal associated with the brand.

Here are the complete results from the survey:

1. Do you consider yourself a car enthusiast?

I love cars – 60.88 percent

I like cars but would not consider myself a car enthusiast – 33.10 percent

Cars are just a mode of transportation for me – 6.02 percent

2.  What is your vehicle preference?

Car – 65.51 percent

SUV – 28.85 percent

Truck – 7.64 percent

3. Which of the following vehicles most describes your personality?

Tesla – 43.02 percent

Chevy Corvette – 27.44 percent

Honda Accord – 10.23 percent

Ford F-150 – 8.60 percent

Hummer – 8.14 percent

Chevy Volt – 2.56 percent

4. What political affiliation do you consider yourself?

Democrat – 26.64 percent

Republican – 41.36 percent

Independent – 32.01 percent

5. If you had to vote today, who would you vote for?

Trump – 39.34 percent

Clinton – 36.30 percent

Someone Else – 34.36 percent

6. Which of the following best describes the personality of this year’s election?

A driverless car – 34.03 percent

A four-wheel SUV going off road where ever it wants – 29.84 percent

A Volkswagen where what see, may not be what you get – 18.41 percent

Battle of the hummers – 16.32 percent

Chevy Volt – 1.40 percent

7. What kind of car do you think Hillary Clinton prefers to drive?

Mercedes-Benz GL Class – 13.38 percent

Cadillac Escalade – 12.68 percent

Mercedes-Benz E Class – 11.50 percent

BWM 5 Series – 5.40 percent

Cadillac CTS – 5.16 percent

Buick Lacrosse – 4.23 percent

Chevrolet Suburban – 3.76 percent

Lexus RX – 3.76 percent

Audi A6 – 3.29 percent

Mercedes-Benz C Class – 2.35 percent

BWM X Series – 2.11 percent

Buick Regal – 2.11 percent

GMC Yukon – 2.11%

Subaru Legacy – 2.11%

Toyota Corolla – 2.88%

8. What kind of car do you think Donald Trump prefers to drive?

Cadillac Escalade – 28.07 percent

Mercedes-Benz GL Class – 16.75 percent

Mercedes-Benz E Class – 11.32 percent

BMW 5 Series – 6.84 percent

Cadillac CTS – 5.42 percent

Audi A6 – 3.77 percent

BMW X Series – 3.30 percent

Chevrolet Suburban – 3.07 percent

GMC Yukon – 3.07 percent

Mercedes-Benz C Class – 2.36 percent

Ram 1500 – 1.89 percent

Volkswagen Jetta – 1.42 percent

Ford F-150 – 1.18 percent

Infiniti QX80 – 1.18%

Ford Expedition – 0.94%

9.  How long do you currently keep cars for?

6 - 12 Months – 33.06 percent

12 - 20 Months – 10.82 percent

21- 36 Months – 32 percent

36 - 48 Months – 18.82 percent

48 - 60 Months – 9.18 percent

Longer than 5 years – 26.12 percent

10. Are the elections results likely to affect how often you replace a car?

Not very likely – 77.10 percent

It could have an effect on me – 16.12 percent

Most definitely, depending on who wins – 6.78 percent

11. Which of the following are you concerned about when it comes to cars?

The prices are getting too high – 56.22 percent

Concern over high repair and/or maintenance costs – 53.11 percent

Cars are getting too complex and complicated – 17.46 percent

Subprime loans are getting out of control – 14.59 percent

Autonomous vehicles will ruin our roads – 11 percent

12.  What do you think of Volkswagen scandal?

Volkswagen should be ashamed – 39.81 percent

Not cool, but I still wouldn’t get it fixed – 21.06 percent

I was not aware of any scandal – 13.66 percent

They were wrong, I will never get a VW again – 13.43 percent

Nothing wrong, the cars perform better – 12.04 percent

13. What is your gender?

Female – 16.32 percent

Male – 83.68 percent

14. How old are you?

18 – 29 years old – 6.98 percent

30 – 39 years old – 16.74 percent

40 – 49 years old – 20.70 percent

50 – 59 years old – 24.42 percent

60 – 69 years old – 20.23 percent

Over 70 year old – 10.93 percent

2016 CPO sales likely to top previous record


Cox Automotive chief economist Tom Webb fully expects this year’s certified pre-owned vehicle sales total to surpass what the industry generated in 2015, which was 2.55 million units.

During his quarterly conference call with the media and other industry observers this week, Webb projected that this year’s CPO sales figure might land near 2.7 million, perhaps even 2.8 million units, which means the industry is likely to produce a robust or perhaps even record-breaking quarter to close 2016.

According to Autodata Corp., CPO sales came in just above the 2-million mark through Sept. 30, a figure 3.7 percent higher than the amount registered at the same point last year. The industry is coming off consecutive quarterly performances that established a new record (the Q2 figure of 678,169 units) as well as the second-best figure (the 675,725 units turned in Q3).

During the fourth quarter of last year, the industry moved 624,624 CPO units for a 4.8-percent hike. Webb indicated “the year-to-date increase we’ve had through September might end up being a little bit less by the time we get to the end of this year simply because there were some high sales last year.”

And with off-lease volume projected to hit 3.6 million next year and likely to approach 4 million lease returns in 2018, the raw material is there for plenty of CPO sales, according to Webb.

“Certainly the off-lease units create the inventory for those programs,” Webb said. “They also put some pressure in terms of the lessors supporting the programs in order to protect residual values for end-of-term units.

“To a certain extent, it relies on the efficiency of your dealership network because there are certain franchises, primarily on the luxury side, where in terms of the dealer’s lots, it’s basically all CPO units or a very high majority are CPO units of that brand,” he continued. “Do they have the potential for greater throughput there? Once it’s outside the franchise network, it’s no longer going to be certified.

“The decision to CPO a unit or not CPO a unit is the dealer’s, so that it’s a profit opportunity to do or not to do that,” Webb went on to say.

Beyond the raw sales figures, Webb said it’s that opportunity to generate margin that’s driving dealerships to move CPO metal.

Dealerships’ certified divisions, in part, have turned the tide of diminishing margins. Webb pointed to performances of the publicly traded dealer groups as evidence of the trend.

“There has been some players out there in terms of the publicly traded who are doing a good job and have actually tried to protect gross margins on the used-vehicle side,” he said. “It was getting a little dicey there as they kept driving margins lower. I think there is a little bit of protection of that gross margin and to a certain extent you sacrifice volume because of that.

“We just got to a point where the margins got as low as they can get. A lot of the easy efficiency gains in order to allow that margin reduction had already been achieved. I think we sort of level off from here,” Webb added.

And to keep margins steady, it’s the certified pre-owned model that’s literally the vehicle to get dealers there, especially within franchised operations.

“Typically the bulk of their sales are units under 5 years old unless they’re setting up a separate lot to handle those older units,” Webb added.

Expectations for September used-car sales

CARY, N.C. - 

Including numbers from franchised and independent dealers plus private-party sales, there will likely be somewhere in the neighborhood of 3.2 to 3.3 million used-vehicle sales this month.

That’s according to respective forecasts from and TrueCar.

Edmunds is calling for 3.3 million used sales this month, which would translate to a seasonally adjusted annualized rate of 38.6 million. That’s up from 3.2 million sales in August with a steady SAAR.

Meanwhile, TrueCar is forecasting 3.23 million used sales, which would be a 1.9-percent year-over-year decline. 

Gauging whether a leasing bubble is inflating


A couple of years ago when pundits and naysayers wanted to discuss auto financing, often they gravitated toward how the industry’s recovery stemmed from subprime activity, resulting in a possible bubble similar to what created the Great Recession.

While analysts and experts eventually extinguished that line of thinking by showing performance data, these same industry folks could soon be refuting notions that another auto bubble is inflating — but this time because of leasing.

Earlier this month, Experian’s latest State of the Automotive Finance Market report highlighted leasing volume as a share of all new models financed set another record during the second quarter. Analysts indicated leasing continued its strong growth as the share of new vehicles leased jumped from 26.92 percent in Q2 2015 to a record high of 31.44 percent in Q2 2016.

Then this week, J.D. Power and LMC Automotive indicated that they have never seen franchised dealers slap as much cash on the hood as they are seeing this month to keep new metal turning.

Analysts reported on Monday that incentive spending thus far in September is at a record level of $3,923 per unit. That figure surpassed the previous high of $3,753 set in December 2008.

To gauge whether these trends should be triggering alarms, we visited again with Anil Goyal, senior vice president of automotive valuation and analytics at Black Book, which pushed out online survey results involving more than 500 auto finance company executives. The survey released this week showed a large number of auto finance companies say they don’t leverage residual data for their portfolio despite the majority of finance companies admitting that portfolio risk assessment and remarketing remain at the top of their portfolio strategy for a growing number of used vehicles.

“The environment we are in is more volatile with trends that are very different than what we’ve seen in the last five years, with more supply coming back, with more incentives on the new vehicle sales and leases, with increased use of leasing,” Goyal said.

“There is increased risk around residuals in both loan and lease portfolios in trying to understand what that vehicle might be worth when it’s returned or repossessed,” he continued.

Goyal recapped that projecting residual values certainly is challenging for automakers and their captives since there are “a lot of moving parts.” The OEM must coordinate production schedule, work with suppliers and forecast how much demand for a particular model there might be.

And if their projections are off, Goyal pointed out automakers can join forces with captives to incentivize their customers to take delivery. They can simply reduce the vehicle price; that's the cash on the hood. They can reduce the APR, especially since captives originate leases mostly with prime and super-prime customers.

Also, they can offer a subvented residual enhancement. For example, if the residual value projection for a vehicle is 55 percent of its worth as a new model after three years, the OEM and captive can bump up the level to 60 percent in order to make the customer’s lease payment more manageable.

“There’s a lot of those levers that the OEM and the captives have to play around with to ensure that they are making the sales on their existing vehicles and keeping their pricing competitive with others and monitoring that scenario to make the lease payment work,” Goyal said.

But off-lease vehicles are increasing in the wholesale space. Certified pre-owned sales continue to set records, but what if retail demand for those units diminishes?

“Definitely the risks in the leasing scenario are increasing. Essentially, the captive and manufacturers sometimes when they share the risk, you’re essentially pushing the losses to the back end. You’re making the sale, but you’re going to have a loss,” said Goyal, who is one of the experts coming to Used Car Week at the Red Rock Resort and Casino in Las Vegas Nov. 14-18.

“In the last few years, used-car values have been very strong, so in many cases the vehicle that got returned there was not a loss,” he continued. “In fact, in many cases there was a profit to be made because the values were higher than the residuals, especially on SUVs and trucks. But that has really propelled lease penetration.

“The forecast is lower now for where the values are going to be,” Goyal went on to say. “If more and more leases are essentially made feasible to keep that payment lower through subvented residuals, you’re now going to have a situation where the losses will start to appear on the returns.”

So does leasing bubble talk have merit? Goyal didn’t go to that degree during our conversation on Wednesday. He reiterated how leasing is primarily in the prime and super-prime credit tiers. He added rating agencies often make conservative forecasts when making their analysis of securitizations filled with leases.

“We don’t see it as a bubble, but I do think there is an increased risk developing,” Goyal told Auto Remarketing. “That essentially limits how long leasing can grow.

“If we have higher and higher incentives to make the leasing work, you’re essentially moving from selling that vehicle to really just providing the vehicle on a three-year lease and pushing out your losses as a captive and manufacturer,” he continued. “That’s a trend that could be disturbing if it continues to grow by increasing the risk in the system.”

To help mitigate that risk, Black Book’s latest white paper, “How To Grow a Profitable Used Leasing Portfolio,” can help finance companies identify which vehicles make good used leasing candidates for their portfolio. It is available for download by clicking here.

“You don’t want to have unexpected surprises,” Goyal said. “What we promote to our lenders is not a one-and-done kind of analysis. Rather it’s something that’s ongoing, a refresh of the forecast because the trends are changing.”

Have auto sales truly reached their peak?

CARY, N.C. - 

The latest Kerrigan Auto Retail Index report raises a question: Did U.S. auto sales peak in 2015?

According to the report, new-vehicle retail sales in August are expected to be down 6.5 percent from a year ago, which marks the fourth month in the last six with declining retail auto sales. In contrast to predictions earlier in the year, SAAR projections for 2016 are now expected to come in lower than 2015.

The Kerrigan Auto Retail Index — composed of the seven publicly traded dealer groups with operations focused on the U.S. market — was down 2.16 percent in August, while the S&P was down 0.12 percent.

This brings the year-to-date change in The KAR Index down 12.28 percent and off 30.37 percent from the market peak in June 2015.

Only two of The KAR Index companies were up in August, with Penske Automotive Group posting a 14.34-percent gain and CarMax a 1.17-percent gain. All others were down for the month, with AutoNation and Asbury Automotive Group leading the decline, each down more than 11 percent in August. Five of the companies posted a drop in same-store sales in the second quarter, with Penske not offering that data.

With sales growth stagnant, the public companies are focusing more on expense management and operational performance. 

Additionally, the public auto retailers have continued to improve F&I revenue per vehicle, with Sonic Automotive leading the way, posting a 5.7-percent increase over last year, to $1,342 per unit retailed. AutoNation, up 4.3 percent year over year, leads F&I revenue per vehicle at $1,602.

Jeff Schuster, senior vice president of forecasting at LMC Automotive, reported, “As we look at the remainder of the year, the industry faces an uphill struggle to match last year’s performance. With mixed economic signals, it certainly looks like U.S. auto sales may have peaked in 2015.”

Other significant industry data from the report:

— Average new retail transaction price, projected at $30,942, surpasses last August, $30,061.

— Total auto retail spend of $39.3 billion is the seventh-highest month on record.

— Incentive spend in August increased dramatically to $3,559 per vehicle versus $3,419 in August 2015, not far from the record of $3,753 set in December 2008.

— Truck share continues to increase, up to 59.6 percent.

— Leasing accounted for more than 31 percent of new car transactions in the first half of 2016, according to Experian Automotive. 

— Fleet sales increased to 3 percent year-over-year to 223,200 vehicles.

— The percentage of people who qualified for subprime auto loans, but are 60 days or more behind on payments reached 4.59 percent in July, a 17-percent increase from a year earlier, according to Fitch Ratings.  Delinquencies among prime auto loan borrowers also rose, but remain at a relatively low 0.4 percent, or 21 percent higher than a year ago.

Another record year? Perhaps not

After a record U.S. sales total in 2015, Kelley Blue Book’s full-year forecast for 2016 calls for sales in the 17.4 to 17.8 million SAAR range. 

During a monthly sales day call hosted by KBB and Autotrader, analyst Tim Fleming said KBB had forecast about 1.54 million units in August — down 2 percent from August 2015 — for a SAAR of about 17.3 million. “It doesn’t look like we’re going to hit that this month,” he said. “Sales are coming in a bit lower.”

Fleming said that with about 80 percent of August sales in, that target was looking to be off by about 5 percent, which would translate to about a SAAR of 16.7 million units.

While new-car sales growth is slowing, ATP is continuing to climb, rising 2.6 percent in August, Fleming said. reported that estimated ATP for light vehicles in the U.S. was $34,143 in August, up 2.3 percent year-over-year.

"However, incentives also have steadily climbed, and the ratio of incentive spend to average transaction price is at its highest point since 2009, at 9.3 percent.  As we near or pass the peak of new-car sales this year, each automaker will need to moderate production and incentive levels accordingly to maintain residual value strength moving forward."

During Thursday’s call, Fleming and Michelle Krebs, senior analyst for Autotrader, were asked if they thought 2016 could still surpass 2015’s record auto sales.

While they may have thought it was a possibility earlier in the year, they are less likely to think so now.

In part, it depends on the automakers.

“I think the biggest wildcard in how the year will end up will be how to automakers respond to some of the softness in the market,” said Krebs. “Will we see them pull out all the stops for incentives?

“If they do go for that record … it causes automakers to do unhealthy things. It causes them to allow inventories to build up, then to really beef up incentives. That has a very bad effect on residual values, and it certainly hurts profit margins.

“This will be the biggest test from the automakers in terms of a disciplined approach to inventory and incentives that they have promised to stick with,” she went on to say.

Fleming said he was pretty much undecided on the point before last month.

If I had to put rough numbers on it, maybe before this month I was close to 50-50,” he said.

“After seeing the numbers come in today, I’d say it’s less than 50. … I see that as a good thing. For the overall health of these brands, the residual values, it’s unnatural to hit records years after year.”