Sales Forecasts

3 report findings show ride sharing might not squelch car buying altogether

BOSTON - 

The speculation that dealership showrooms and finance company underwriting offices would become desolate because consumers simply would abandon vehicle purchasing for alternative transportation options such as Uber and Lyft appears to be a little bit premature.

Experts from Strategy Analytics acknowledged that OEMs are rightfully concerned about the impact the increased usage of these options will have on consumers' interest in purchasing future vehicles. However, a new report from the automotive connected mobility (ACM) service at Strategy Analytics released on Monday has found that ridesharing usage may not negatively impact the future vehicle purchase intention of current vehicle owners.

Key report findings from the report, titled Impact of Ride Sharing Frequency on Vehicle Purchase Intention, include:

—Ridesharing usage actually increased the likelihood that current vehicle owners would purchase another vehicle within the next five years. This was true across the U.S., Europe and China.

—Frequent ridesharing users that also own their own vehicle had greater transportation needs than those that don’t. Ridesharing fills a niche that is convenient but will not supplant their personal vehicle.

—Millennials who had no children and used ridesharing at least once a week were less likely to purchase another vehicle within the next five years than all respondents that had children.

“The question of how emerging transportation options like ridesharing and car-sharing will impact vehicle sales is a very complex one to answer. Issues of cost, convenience, usability, privacy, type of journey and length of journey all impact transportation choices,” said Chris Schreiner, the report’s author and director of syndicated research.

“Frequent ridesharing users do not seem likely to delay their next vehicle purchase, but it is still possible that they might choose a less expensive or lower class vehicle. Alternatively, they may choose to downsize their fleet from three vehicles to two,” Schreiner continued.

Vice president Kevin Nolan added, “However, it is prudent to note that external factors such as ridesharing competition reducing end-user costs, expanded availability and autonomous taxis, all have the ability to negatively affect consumers' future purchase decisions."

To purchase the entire report, go to this website.

Jaguar Land Rover invests in Lyft

While the Strategy Analytics report shared its points on Monday, automakers still appear to be staying connected with ride-sharing firms.

Jaguar Land Rover’s InMotion Ventures on Monday announced a $25 million investment in Lyft; a move the company indicated will support Lyft’s expansion and technology plans.

The OEM added that the funds also will provide the opportunity to develop and test its mobility services, including autonomous vehicles, and to supply Lyft drivers with a fleet of Jaguar and Land Rover vehicles.

InMotion managing director Sebastian Peck said, “We are excited to collaborate with a leading platform like Lyft not only on developing premium mobility solutions but also devising innovative solutions to the transport problems Jaguar Land Rover’s customers face.

“Personal mobility and smart transportation is evolving and this new collaborative venture will provide a real-world platform helping us develop our connected and autonomous services,” Peck continued.

The Lyft investment was included as part of the company’s most recent round of fundraising, which closed in April.

“We’re excited to join forces with Jaguar Land Rover and InMotion,” Lyft president and co-founder John Zimmer said. “Lyft envisions a future where shared mobility will transform cities and improve people’s lives. This partnership will help us achieve that ambitious goal.”

InMotion’s latest investment follows its recent seed investment in SPLT, the Detroit-based digital carpool business, which works with Lyft to provide non-emergency medical transport.

Hanno Kirner, executive director of corporate and strategy at Jaguar Land Rover added, “This is a strategic investment for both parties as we focus on innovating new mobility solutions for our customers. Collaborating with an expanding technology business like Lyft is going to help us both accelerate our ambitions.”

This isn’t the first time Lyft landed investment funds from an automaker. Back in January of last year, General Motors pushed $500 million into Lyft as part of a long-term strategic alliance to create an integrated network of on-demand autonomous vehicles in the U.S.

In addition, GM now holds a seat on Lyft’s board of directors thanks to the investment.

Carvana sets new revenue record with 118% spike in Q1

PHOENIX - 

Online used-vehicle retailer Carvana highlighted that its first-quarter revenue soared to a new record, increasing by 118 percent year-over-year.

Unfortunately, the record revenue figure of $159 million wasn’t enough to overcome the company’s expenses that resulted in Carvana sustaining a net loss of $38.4 million, representing an increase of 122 percent.

Still, with improvements in the number of units retailed and gross profit per unit, Carvana leadership remains upbeat about its future as a publicly traded company that caters to online-savvy vehicle purchasers.

“We are excited to announce record revenue in our first earnings report as a newly public company. Our strong performance this quarter reflects a significant increase in retail units, as well as expansion into new markets. During the quarter we made important enhancements to the customer experience through new product development, resulting in ongoing optimization from website through vehicle delivery,” Carvana founder and chief executive officer Ernie Garcia said when the company released its financial report late on Tuesday.

“We continue to see increased consumer adoption of online car buying across our markets, charting a clear path to consistent growth within the $710 billion U.S. used auto market. Carvana’s unique business model includes proprietary technology and assets, like the vending machines, that deliver customer experiences that position us to execute against our aggressive growth plans,” Garcia continued.

The company reported that it retailed 8,334 vehicles during the first quarter, an increase of 120 percent year-over-year. Carvana’s total gross profit per unit was $1,169, an increase of $123 per unit.

And the company’s total gross profit for the quarter came in at $9.7 million, a spike of 146 percent. Still, Carvana’s net losses have gone from $17.3 million in the year-ago quarter to $35.7 million in the closing quarter of last year to above $38 million in Q1.

Looking ahead, Carvana shared expectations for its second quarter; forecasted metrics that included:

• Retail unit sales of 10,000 to 10,500

• Total revenue of $193 million to $203 million

• Total gross profit per unit of $1,375 to $1,425

And the company went on to give predictions of what it might generate for the full year, including:

• Retail unit sales of 44,000 to 46,000, an increase from 18,761 in 2016

• Revenue of $850 million to $910 million, an increase from $365 million in 2016

• Total gross profit per unit of $1,475 to $1,575, an increase from $1,023 in 2016

• 16 to 18 new market openings, bringing the company’s end of year total to 37 to 39

And on Wednesday, Carvana announced the company added two more markets in Georgia, bringing aboard Augusta and Macon.

Along with two new additions in the Peach State, Carvana operates in 29 markets:

—Atlanta
—Austin, Texas
—Birmingham, Ala.
—Charlotte, N.C.
—Chicago
—Cincinnati
—Cleveland
—Columbia, S.C.
—Columbus, Ohio
—Dallas
—Greenville, S.C.
—Hampton Roads, Va.
—Houston
—Indianapolis
—Jacksonville, Fla.
—Memphis, Tenn.
—Miami
—Nashville, Tenn.
—Orlando, Fla.
—Philadelphia
—Pittsburgh
—Raleigh, N.C.
—Richmond
—San Antonio
—St. Louis
—Tampa, Fla.
—Washington, D.C.

Editor’s note: Watch for an upcoming report from Auto Remarketing featuring more comments from Carvana leadership about its Q1 performance and future expectations.

Used-car sales to dip modestly

SANTA MONICA, Calif.  - 

Used-vehicle sales across the industry may move down sequentially this month, but the seasonally adjusted annualized rate should maintain, according to a forecast released Thursday by Edmunds. 

The company is calling for 3.3 million used-car sales this month, following April sales of 3.4 million used units and 10.2 million in the first quarter.

Meanwhile, ALG is forecasting 3.23 million used-car sales for May, which would be a 5.4-percent decline from a year ago. 

Edmunds is looking for May’s used-car SAAR to reach 38.3 million used sales, which is consistent with April.

According to Edmunds’ Used-Vehicle Market Report released earlier this month, first-quarter used-car sales were off 1.3 percent year-over-year.

However, it was still ahead of the 9.8 million used vehicles sold in Q1 of 2015, the 9.6 million in Q1 2014 and the 9.8 million in Q1 2013.  

Franchised dealers sold 2.9 million used units in Q1, down 0.3 percent but ahead of the first quarter numbers in each of the four other years included in the Edmunds data set (2012-2015). 

 

7% compound annual growth likely in global used-car market

CARY, N.C. - 

You can expect the international used-car market to show some nice growth over the next handful of years, according to two reports released in the past week.

Technavio, a global tech research and advisory firm, forecasts a 128.42 million-unit global used-car market by 2021. That would represent a compound annual growth rate of more than 7 percent.

Meanwhile, Research and Markets is calling for 7.07 percent compound annual growth in the international used-car business for the 2017-2021 period.

While the Americas has had the strongest share of the global used-car market (47.76 percent in 2016), according to Technavio, the area of the world that will see the most growth is the Asia-Pacific Region.

And it could make a run for the title.

“APAC is the fastest-growing segment of the used car market, expected to showcase a CAGR of over 20 percent through 2021,” Technavio analyst Praveen Kumar said in a news release.

“The region is expected to increase its market shares swiftly and is likely to compete with the Americas by the end of the forecast period,” Kumar added.

Technavio says the used-car market in these countries is being helped by the growth in e-commerce along with easier emission norms.

“The online sales contribute to the majority of the organized used car sales in APAC, with traditional brick-and-mortar stores moving to online platforms for generating leads and increasing customer base,” Technavio said in the release.

As far as the Americas, late-model vehicle demand is pushing prices of these cars higher and helping to drive more revenue dollars in this market, according to Technavio. The company also credits e-commerce gains and improving employment prospects as influential.

Plus, ownership cycles are becoming shorter.

The firm said there was 43.58 million used-car sales in the Americas last year.

“The Americas occupied a majority 48 percent of the global used car market in 2016, and is expected to continue its dominance through the forecast period, driven by decreasing ownership cycles,” Kumar said.

Moving over to Europe, Middle East and Africa (EMEA), Technavio is forecasting a 2021 used-car market of 36.03 million units.  Its share of the global market in 2016 was just under 34 percent.

Calling the auto industry in this region “quite mature,” the firm points to the aging population and higher fuel costs as key engines of used-car growth.

“Regions such as Russia lack stringent vehicular emissions regulations, which will positively impact the market,” Technavio said. “Compact and midsize cars are the most preferred vehicles due to their wide availability and decreased prices.”

Pre-owned quality perception

While also pointing to the value proposition of pre-owned cars as a key factor in the segment’s growth, Research and Markets also credits online used-car dealers and more automakers getting into the used-car space.

More specifically, Research and Markets suggest that consumers are viewing the quality of used cars more favorably because of those two factors.

“The majority of the purchase decision regarding used cars depends on the customer's conviction about the quality of the car available. Customers purchase used cars due to the affordability,” the company said. “The quality of the used vehicle is a key decision-making factor as the details regarding the ownership of the vehicle are vague and damages after the vehicle purchase are not covered by the warranty.”

 

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April seems to be positive sign for used-car market

CARY, N.C. - 

When it comes to used-car prices, the sky might not be falling after all, if indications from a Manheim report bear out. 

The auction company’s index measuring used-car prices increased for the first time all year, and the used retail market buzzes along at a solid clip.

The Manheim Used Vehicle Value Index came in at 124.7 in April, which was up 1.6 percent year-over-year. According to a report accompanying the index, wholesale prices climbed 0.5 percent from March on a mix-, mileage- and seasonally adjusted basis.

In an analysis accompanying the index, Cox Automotive chief economist Tom Webb downplayed the concern many analysts have expressed about used-car price declines. 

“Although the Manheim Used Vehicle Value Index increased for the first time this year on a month-over-month basis, used-vehicle values have not collapsed the way many analysts have warned of for more than a year due to expected increases in wholesale supplies,” Webb said. “And in fact, what weakness we have seen is probably more a result of excessive new-vehicle inventory, not used.” 

Edmunds executive director of industry analysis Jessica Caldwell echoed some of that new-car inventory concern in monthly sales day comments provided by the company.

“We’re seeing a dramatic lag in the 2016 model-year selldown. In April, 8 percent of vehicles sold were 2016 models, up from only 3 percent five years ago,” Caldwell said. “Inventory buildup is a top concern of automakers and all eyes are on whether cuts in production are enough to offset expected dips in sales.” 

Black Book index shows rare gain, too

Another one of the indices measuring wholesale vehicle values has seen its first increase in 27 months.

While the April reading of Black Book’s Used Vehicle Retention Index (113.1) was just a hair above March’s (113.0), it’s at least a temporary pause to the gradual downturn that has been ongoing since January 2015.

The index, which is based on Black Book wholesale average values on 2- to 6-year-old vehicles, was at 126.8 that month before sliding for more than two years.

“April saw stronger seasonality trends than what we had been seeing during the last few spring seasons,” Black Book’s Anil Goyal said in a news release accompanying the monthly Used Vehicle Retention Index.  

“There certainly remains a growing concern over rising supply levels, which typically leads to higher depreciation, but with prices on some segments seeing better value, consumers may be more willing to consider used vehicles in some key car segments.”

Spring has been more robust than anticipated, and the strength in car retention has been encouraging, says a spokesperson for the company via email when asked for Goyal's take on whether April was temporary relief or an encouraging sign.

However, prices are likely to move back into the usual summer depreciation, the spokesperson said. 

Used-car retail appears strong

Moving over to retail, Webb — citing data from NADA — said that used-vehicle retail sales (including private sales) climbed 3.6 percent in the first quarter, with dealer sales up even more (5 percent for franchised, 5 percent for independents).

It appears April continued the momentum, based on Cox Automotive’s “channel checks.”

In late April, Edmunds was forecasting 3.6 million used-car sales for the month, up from 3.4 million in March, with a SAAR of 38.4 million for both months.

Meanwhile, ALG was forecasting 3.32 million used-car sales for April, which would have been off 0.8 percent year-over-year. 

Cargo room, vantage point drive SUV interest

CARY, N.C. - 

Consumers' heightened interest in compact SUVs and midsize utility vehicles over sedans is driven by cargo and a high vantage point, rather than the recent drop in gas prices nationally, says Michelle Krebs, executive analyst for Autotrader.

“KBB did a quick poll, not scientific necessarily,” she said during a conference call with the media on Monday. “I keep seeing articles about gas prices driving that trend; not so much, according to this quick poll.”

Shoppers said they were most attracted to cargo area and the high vantage point of SUVs, Krebs said.

Krebs joined Alec Gutierrez, senior analyst for KBB, to provide insight on April’s auto sales results and recent market trends.

“I’ve seen some stories about it being a weak month I think we need to take a breath and put this in perspective. We’re still around that 17 million mark — that’s a very high level,” Krebs explained.

“Since 1980 we’ve only had four years that we’ve been over the 17 million mark. If you look over time, over the last almost 40 years the average is 14.7 million vehicle sales a year, so we’re tracking well ahead of that.”

She pointed out that car sales are down a bit down from forecast, but it’s to be expected at this stage of the cycle.

“This sales cycle has plateaued so we expected some of these dips, incentives remain plentiful and sport utilities dominate over cars,” she said.

In the next couple of years, Gutierrez said he wouldn’t be surprised to see sales stabilize back down to the low-to-mid-16 million unit range.

He explained that the quality of vehicles on the road today is strong. That includes cars built in the last five years and even in the last 10 years that are capable of lasting longer, which impacts consumer demand.

“I think there’s a very real possibility that if manufacturers pull back a bit on production to bring incentives in line, to bring inventory levels in line, we can very easily see the market back into a 16 (million), 16-and-a-half (million) unit range year-in, year-out,” Gutierrez said.  

He also said that he expects manufacturers’ profit margins to remain high.

“We are at a point where margins should be stabilizing pretty soon. In terms of overall mix, I don’t know that you’re going to see full-size trucks or small SUVs really stretch too far beyond where they’re at today,” he said. “In fact, if you look at the numbers from a growth perspective, over the last couple of years, we saw compact-SUV sales up in the double-digit range. We had years where sales were up 10 percent, 15 percent, 20 percent.”

So far this year, small SUV sales are only up about 5 percent and trucks are up similarly — about 5.5 percent, according to Gutierrez.

“Midsized cars are still declining rather rapidly; they’ve got about a 20-percent drop year-over-year,” he said. “I think you’ll start to see those margins stabilize as the growth in trucks and SUVs hit the peak and the decline in midsize and small cars hit the bottom.”

Gutierrez said that he predicts some degree of stabilization this year in terms of segment mix and market share.

“One thing I would add about profit margins is that it was something not paid much attention pre-recession and yet the car companies, especially here in Detroit, are laser-focused on profit margins, even more than volume these days,” Krebs added.

She said manufacturers have since shifted focus more on profit margins rather than all-out vehicle sales volume.

Group 1's Rickel talks trucks, residuals & more

CARY, N.C. - 

Consumers' increased interest in both trucks and SUV’s over sedans is a shift the industry will have to wrestle with even more this year, says John Rickel, senior vice president and chief financial officer of Group 1 Automotive.

“The overall industry, if you go back two years ago, had a 50/50 split between cars and trucks. Last year it got to 60/40 and this year could be 65/35 — that is a massive, massive shift in consumer preference,” Rickel said during  Group 1’s presentation at the Bank of America Merrill Lynch 2017 Auto Summit in New York last week, a webcast of which  Auto Remarketing viewed.

“Trucks and SUV’s are continuing to go from strength to strength. There’s a lot of customer demand there.”

He points to lower and affordable gas prices as the primary driver of the shift.

“If you can have the optionality of a bigger package — basically what a truck or SUV offers of you — most consumers are opting for that and the industry is struggling to catch up with that switch,” he said.

Used-car sourcing

During the presentation, Rickel said his group’s top source for used-cars are customers’ trade-ins.

“When we’re under pressure on the new vehicle sales, we’re not selling as many units — we’re not getting as many trades, and we have to go out to auction to supplement,” he said.

One downside,  Rickel said, is that going to the auction to buy inventory can be more costly over time, after factoring in all of the added expenditures dealers incur.

“You’re going to pay a little bit more, you’re bidding against other dealers, you pay an auction fee and you’ve got transportation costs,” he said.

Residual trends in segments 

In regards to sedans, within the used-car market in particular, there’s currently some pressure on residuals, according to Rickel.

“A lot of leases were written three years ago and that’s were a lot of volume is coming back,” he said. “We’re seeing a number of our OEM partners that have had to warn on residuals. You’re seeing them pull back somewhat on leasing.”

Rickel said he isn’t too strained about the residual values of trucks and SUVs.

Compared to sedans, trucks have a longer life and a number of consumers of have second order uses for them, he said.

In his 30 years of experience and the lease cycle he has seen, it has been rare that “you get a big, big falloff in truck residuals, so I’m less concerned about that,” Rickel said.

Specifically, if the rebound of the housing industry continues, he said it’s likely that construction workers use of trucks will increasingly secure their current standing in the market.

Rickel also added that if an infrastructure program comes from the Trump administration, it will presumably solidify truck sales as well.

Tesla’s used market performance surpasses GM and Ford

CARY, N.C. - 

Pre-owned Tesla Model S vehicles sell notably faster than some of its U.S. counterparts’ best-selling used models, according to Autolist

The firm recently released a study that delved into used Tesla vehicles’ overall market performance relative to those of General Motors and Ford.

The pre-owned Model S averages 87 days on market, 5 percent below its peer group, reports the buyer intelligence firm’s study titled, Changing of the Guard: Tesla vs GM & Ford. That peer group includes the Audi A7, Porsche Panamera, BMW 6 Series, Mercedes-Benz CLS, and Lexus LS 460.

The top used models from GM and Ford — the Ford F-150, Chevrolet Silverado 1500, Chevrolet Malibu and Ford Fusion — spent  between 88 days and 104 days on the market.

Additionally, the Model S also has higher pre-owned prices relative to expectations than top-performing GM and Ford vehicles.

Prices of the Model S have trended between 3 percent and 5 percent above expectations for the past year.

Meanwhile, prices for the top-performing used GM and Ford models have trended within 1 percent (above or below) expectations throughout the past year,

To compile this study,  Autolist’s analysts took a look at more than 10 million vehicles from April 2016 to January.

“One thing important to understand about our study is — why we think its impactful — is because it’s a comparison relative to a peer group. And that’s a really important element of this analysis because if you’re just comparing raw numbers overall, you can control a cross segment,”  Alex Klein, vice president of data science at Autolist, said in a phone interview with Auto Remarketing.

“But what this is really about is ... Tesla’s performance relative to its competitors and Ford and GMs performance relative to its competitors. And when you think about things through that lens, that is really what drives brand perception, market value, investment financials, and so on and so forth.”

With the next Tesla model — the Model 3 — set to debut later this year, Klein said the brand's performance in coming years could be determined by the reception of this model, which would be its first mass-market vehicle.

“They have thus far just been a luxury market loyalty group,” he said. “And so when you introduce a mass-market vehicle at scale, there are a lot of potential benefits to getting more people involved with what is an incredible brand at a baseline level.”

According to a J.D. Power report released last month, drivers who purchase the brand’s lowest-price sedan are less likely to be comfortable with any technology-related snags.

Klein said, “Getting the Model 3 involved will get more people to engage with the Tesla brand and could potentially even further accelerate their performance relative to competitors as more car buyers are able to move from a traditional petroleum powered car to an electric vehicle.”

He said Tesla customers are likely to become interested in buying EVs over the long-term, which again has benefits for Tesla, but could also have benefits for other EVs on the market in the future, too.

“When you are buying a Tesla you are buying a next-generation automobile. There’s a perception that people are pushing the bounds of technology and they are being part of the forerunners of next-generation technology whenever they step foot in a Tesla,” Klein added.

More info on the study can be found here

 

Sedan sales falloff more damaging to creditors than dealers

CARY, N.C. - 

Following the first-quarter, the growing demand for light trucks over cars will continue to be noticeable, but this will likely be more of a quandary for creditors rather than dealers, says National Automobile Dealers Association chief economist Steven Szakaly.

“The falloff in those sedan prices and then the returns of those leases are much more of an issue for finance companies than they are actually for the retail body,” Szakaly said during a media conference call on Wednesday where he and NADA chairman Mark Scarpelli shared insights on the overall economy following the first quarter.

Sedans have lost about 12 percent market share so far this year, and trucks have gained a little above 7 percent, according to Szakaly.

“This is just a continuing story that we see consumers switching to the utility of crossover vehicles, sport-utilities and other light trucks — choosing those over the sedan segment,” he said. “The used-car business remains strong. Sedans are under pressure and clearly we’re seeing that sort of used-car pricing starting to certainly become more negative as a lot of these off-lease vehicles are coming in, but these are manageable issues I think for this industry.”

Szakaly predicts overall new-vehicle sales will total 17.1 million vehicles this year.

“We have economic growth that continues to be what we say is moderate. We are looking at growth here in the first quarter right around 2 percent, forecasting 2.1 percent — still below trend and still below what we’d like to see in terms of economic activity above 2 and a half or even closer to 2 percent,” he said. “What continues to be a net positive is employment, employment growth continues to be strong with plus 200,000 thousand jobs being created in January and February.”

Though the total number of U.S. jobs have seen an increase in recent weeks, wages themselves have remained stagnant and that has a significant impact on the used-car market in particular because consistently high wage earners tend to buy new, he explained.

“Slightly on the negative side, we’ve got this lack of wage growth overall and that continues to be one of the fundamental troubling factors," Szakaly said.

"With the economic growth that has continued here since 2009, wages have not been rising and they haven’t kept pace with some of the rise in prices.”

Despite a decrease in the purchase of sedans overall, customers who can afford their desire for small luxury vehicles are likely to make a purchase this year, according to a recent Jumpstart Automotive Media study that analyses consumers’ car shopping behavior, as well as what segments of vehicles are either gaining or losing traction.

Sedans within luxury-vehicle segment sales grew 7 percent from 2015 to 2016, and shopper interest for midsize and full-size luxury sedans rose over 10 percent, according to the study.

“As long as people are working they are going to be looking at buying new vehicles and used vehicles,” Szakaly said.

Pressure building on ‘fair gap’ between new & used retail prices

CARY, N.C. - 

There remains a “fair gap” and “a good amount of play between” the typical retail price between a new vehicle and a used or even a certified pre-owned model.

However, Kelley Blue Book senior analyst Alec Gutierrez is seeing trends that are putting pressure on his current assertions.

Gutierrez mentioned during a call with the media earlier this week that the average incentive figure is above $3,500 per unit. ALG pinpointed incentive spending at $3,511 percent unit in March, climbing by $415 from a year earlier.

So the difference between similar models that are new versus nearly-new, CPO or whatever moniker a dealership salesperson might use is “tightening every day with incentives and dealer discounts,” Gutierrez said.

“I would expect to this trend continue,” he continued. “Used cars are going to come back in greater and greater volumes. Manufacturers are going to have to decide if they’re going to keep using incentives on the new-car side to maintain some form of competitiveness.

“Certainly if interest rates rise, that will shake things up even further,” Gutierrez went on to say.

And speaking of those interest rates, Edmunds mentioned that its analysis showed the average APR on installment contracts for new-vehicle deliveries in March reached 5.02 percent — the highest reading in seven years. This figure is up from 4.87 percent in February and 4.80 percent in March of 2016.

Edmunds executive director of industry analysis Jessica Caldwell pointed out the last time interest rates for new-model sales crossed the 5-percent mark was in February 2010.

“With high incentives, record inventories and interest rates at the highest we've seen in seven years, we're seeing a lot of signs right now that the tide is turning for the auto industry,” Caldwell said. “The training wheels that were put in place during the recession are coming off, and the industry is now being challenged to see if it can find the right balance on its own.

“While we’re not facing uncharted territory from a historical perspective, it will be interesting to see how the busy spring selling season unfolds as we navigate toward a more a normal pattern,” she added in analysis delivered to Auto Remarketing.

And, of course, the more levers automakers pull to keep new vehicles from piling up in inventory more than they already are, the more the potential impact on the used-vehicle market. The American International Automobile Dealers Association reported that average length of time a new model sat on a dealer’s lot hit 70 days in March — the longest stretch of time since July 2009.

“The industry’s performance in March suggests that sales may be plateauing,” AIADA president Cody Lusk said in a news release. “Now is the time for dealers to tighten their operations.”

ALG chief economist Oliver Strauss added in another news release, “Hefty incentives have negative impacts to resale values, and that can be even more potent in combination with a heavier mix of leasing being used across both the mainstream and luxury segments.”

During the media conference call, Autotrader senior analyst Michelle Krebs alluded to the segment of the retail equation likely to be most benefitting from the jostling between the new- and used-vehicle arenas — potential buyers.

“That adds another layer of complexity. Do you buy the new car or the nearly new car? There’s incentives being offered on some of the certified pre-owned vehicles. It’s going to take some really close shopping to get the best deal, and there are great deals and improving deals out there,” Krebs said.

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