Sales Forecasts

Used supply increases for first time since pre-recession

LOS ANGELES - 

The automotive industry has seen a dramatic year so far.

NADA chief economist Steven Szakaly highlighted what he expects will round out to 17.3 million new light vehicle sales by the end of 2015 and further forecasted a figure of 17.7 million for 2016, ushering in the “beginning of the end” for what Szakaly labeled as “pent-up demand” for light vehicles.

And that hunger for light vehicles may soon be waning for used vehicles, as well. But not quite yet.

Jonathan Banks, the vice president of valuation and analytics for NADA Used Car Guide, a division of J.D. Power, also said during today’s conference call that the used-car market has had an incredible year from the standpoint of prices and absorbing used-supply increases, now leading to a post-recession high in used-vehicle supply.

“In fact, according to NADA Used Car Guide’s data, used supply for zero to eight-year-old vehicles is up by 1.9 percent, reaching somewhere around the 17 million mark,” Banks said. “What’s important about that number is it’s the first time we’ve seen an increase in used supply since pre-recession. So it's the first time we’ve seen an increase in used supply and prices have still remained firm because of that pent up demand.”

But as more and more people are purchasing new or new-to-them vehicles, that demand is dropping – and since vehicles are not only lasting longer but finance terms are getting longer than ever, the used-vehicle pool is expected to grow considerably.

Banks expects, moving into 2016, that the pool of zero- to eight-year-old used vehicles will increase by 3.4 percent – and by another 4.5 percent in 2017.

Looking at prices so far this year, Banks also said that prices on zero- to eight-year-old vehicles have been following a fairly consistent, seasonal pace.

“What that means is we’ve seen the prices increase year-over-year in the beginning of the year – January, February and March – which is a normal, seasonal pattern,” Banks said. “We’ve been seeing prices follow a normal pattern through the spring and summer. And in the fall, when you expect to see the most vehicle depreciation, we’ve been seeing that. Except October did somewhat better than what NADA expected. And a lot of this really has to do with the strong demand from the economy improvements.”

But, like mentioned before, that demand is expected to subside – and one key reason behind that may be the predicted wave of lease returns expected over the next couple of years.

“Lease returns will play the most dramatic role in the used supply increases,” Banks said. “In fact, from 2014 to 2017, lease returns alone will grow by about 58 percent. And a lot of that volume is going to be concentrated on some segments that aren’t really the segments that traditionally have this huge amount of off-lease supply. And that would be segments like the midsize car, compact car and compact utility segments, where you see really a high amount of growth in used supply returning to the market as we move out toward 2017.”

Stay tuned to Auto Remarketing as we plan to take a further dive into the data with NADA Used Car Guide to gain a better understanding of when these off-lease vehicles are expected to return and what segments will be prevalent.

Will there be 40 million used sales this year?

CARY, N.C. - 

You can probably expect nearly 40 million used-car sales this year, according to the latest Manheim Used Vehicle Value Index report.  

Citing NADA data, Cox Automotive chief economist Tom Webb said in analysis accompanying the report that that growth in used sales has accelerated since the year’s outset. The full-year sum, he said, should “approach 40 million.”

Giving some additional context, Webb noted: “Part of this is ‘forced churn’ created by soaring new vehicle sales, but it is not churn conducted at a loss. Indeed, net profit margins are strong.”

As Auto Remarketing reported earlier, there were more than 30.7 million used sales in the first three quarters of the year, which beat last year's pace by 1.8 percent, according to NADA.  

In late October, TrueCar was predicting the industry would reach $640 billion in used-vehicle revenue this year (up from $599.7 billion a year ago) with 38.4 million used cars sold, a 3.8-percent increase over 2014.

Another solid sign is the fact that the seven publicly traded dealership groups* have gone 25 consecutive quarters with same-store retail used-unit sales increasing, Webb said. In the most recent quarter, they were up nearly 5 percent on a sales-weighted basis.

“Although the average gross margin on these sales fell to a new low during the quarter, operating efficiencies and greater throughput per store produced record used-vehicle department profits,” Webb noted.

As for the new-car side, the SAAR was above 18 million in both September and October, Webb said, with the year-to-date SAAR at 17.3 million.

“The net impact of the new vehicle environment will likely remain benign relative to used vehicle residuals for the remainder of the year; but next year’s spring market may see a smaller bounce in wholesale pricing if a leveling, or declining, SAAR spurs additional incentive activity,” Webb said.

Staff writer Josh Hyatt contributed to this report.

*Note: Webb indicates that, "For this analysis, CarMax’s fiscal quarter was shifted forward one month to correspond with the other groups that report on a calendar year."

IHS prediction: A look at cars on road in 2020

LAS VEGAS - 

In the last seven years, the average age of vehicles on the road in the U.S. increased by 15 percent to 11.5 years.

How will that rate change in the next five years? According to Mark Seng, the global aftermarket practice leader for IHS Automotive, the company’s prediction is an increase in overall average age of about 3 percent by 2020.

While that may not sound like a lot, where dealers can make strategic moves to position themselves for maximum potential profit is to look at which segments will see the biggest growth.

According to IHS, by the year 2020, the segment of vehicles aged zero to 5 years will see the biggest growth – a predicted jump of 24 percent. The volume of vehicles over 12-years-old is expected to increase by 15 percent, while the 6- to 11-year-old segment is anticipated to see a decrease of 11 percent.

If you’re not catching on already, why is this good for you? For one, those older cars will need to be worked on. Therein lies an opportunity for service of all kinds. IHS predicts that the vehicles in operation that are 16-years-old or older will number at approximately 76 million — quite the jump if you consider there were just 35 million vehicles in that age range in 2002.

Talking at the Automotive Aftermarket Products Expo in Las Vegas on Wednesday, Seng says the most successful companies will be those that take advantage of the age shift.

“The aftermarket may need to begin thinking differently about the repair ‘sweet spot’ as vehicles age and consumer behaviors change. Success will require that businesses adapt to the evolution in a timely manner,” Seng said. “Nimble aftermarket organizations that embrace and prepare for the changes underway will have the greatest opportunity to succeed moving forward.”

Segment shifts more toward imports and crossovers?

Looking at U.S. light vehicle sales, IHS points out the dominance sales of compact CUVs, traditional mid-size sedans, traditional compacts and full-size pickups, which, together, made up over 58 percent of new-vehicle registrations made last year. The company anticipates that the CUV phenomenon will continue in the near term while compact and mid-size sedans will continue to maintain popularity.

Import vehicles currently represent a 27.3 percent share of vehicles in operation in the U.S. IHS expects that percentage may jump to 47 percent by 2020. Imported light trucks have seen a 10 percent jump in share since 2007, now currently representing 15.7 percent of the VIO in the U.S.

Also since 2007, the share of domestic cars has decreased by 2 percent, to 37.4 percent of vehicles in operation, while domestic light trucks represent 19.6 percent, down nearly 8 percent since 2007.

IHS also estimates that nearly 60 percent of light vehicle production will be built on global platforms, giving companies another opportunities to know what to expect and prepare in terms of parts and service.

Used-car sales expected to grow into 2016

CARY, N.C. - 

There’s a lot of chatter regarding the new-vehicle sales heading into the winter, with Kelley Blue Book’s most recent estimate at 17.4 million for the year. But dealers aren’t just concerned with the flash of new sales — they know many of those vehicles will be coming back to their lots eventually, and they want to know what to expect.

Not that the new-vehicle figure isn’t impressive, but in the first three quarters of the year, the National Automobile Dealers Association’s data reveals that more than 30.7 million used units were sold in the U.S., a 1.8-percent increase over last year’s results.

And, according to KBB’s analyst Tim Fleming, those used-sales should continue to blossom with the assistance of new sales and vehicles coming back into the used market heading into the coming years.

“We are looking for used-vehicle sales to continue to grow as we move into 2016,” Fleming said. “The new-car market is incredibly strong right now, but that growth is expected to level off in 2016 and 2017.

Meanwhile, the supply of late-model used vehicles will only increase, thanks to the booming sales growth we’ve (seen) in the past few years, much of which came from leasing. With the increasing supply boosted by more lease returns, prices should continue to ease from record highs seen a few years ago, making the used market even more attractive to consumers,” he said. More lease returns will also mean more opportunities for CPO, which remains a relatively small part of the market but which has also increased its foothold in the industry in recent years.”

Let’s break that statement down a bit. There appears to be a bit of a consensus in the industry that new-vehicle sales growth will peak in the next couple of years.

Following reports from numerous news outlets covering an event in October, where IHS Automotive made a prediction that new-vehicle sales would peak in 2017, Auto Remarketing caught back up with IHS to confirm that those values were still consistent today.

According to Chris Hopson, IHS Automotive’s manager of North American light vehicle sales forecasting, his organization is still holding to its predicted peak of 18.2 million units to be sold in 2017, before tapering off to around 17 million units by 2022. This continued influx of new vehicles bodes well for the next few years of used sales.

“What we’re seeing right now, helping to help support new-vehicle sales, could have a trickle-down effect come the next 48 months maybe to the three- or four-year outlook,” Hopson said.

Jeff Schuster, the senior vice president of forecasting at LMC Automotive, in partnership with J.D. Power’s new-vehicle retail sales report for October, provided a sales outlook, as well.

“The tenacious pace of auto sales since May, combined with the current favorable position of the U.S. economy, is increasing the level of upside potential to 2015 by 100,000 units, while nearly wiping out any downside risk,” Schuster said. “Looking forward, the forecast for 2016 is 17.6 million units, but growing economic stability and consumer confidence could easily push light-vehicle sales toward 17.8 million units next year.”

Hopson says the high uptick in lease rates will fuel those vehicles returning to the used market. Jessica Caldwell, the executive director of strategic analytics at Edmunds.com, said that 29 percent of the new vehicles purchased in October were leased, the highest percentage since March.

One thing that Hopson also says the industry needs to pay attention to are loan terms lengths, which are currently the highest the industry has ever seen. With longer loan terms and credit moving up, people tend to hold onto their vehicles longer, adding another dynamic when trying to predict used-vehicle supply possibilities. Hopson still has questions for the situation, which has no clear answer at this time.

“Is this going to be something that changes some of the dynamics of what we’ve seen historically on vehicle ownership and how it flows through the used market?” Hopson conjectured.

We’ll have to wait and see.

Curious how CPO results favored through last month? Check out Auto Remarketing Editor Joe Overby’s analysis here

Tesla hires 2 execs, announces record Q3 deliveries

PALO ALTO, Calif.  - 

The same day Tesla announced its third-quarter financial results, which included delivering a record 11,602 vehicles, the automaker also promoted new leadership in finance and sales and service.

Jason Wheeler is Tesla’s next chief financial officer, while Jon McNeill becomes president of global sales and service.

The new CFO joins Tesla after spending 13 years at Google, where he was vice president of finance and headed up Google’s global finance function. Wheeler is replacing Deepak Ahuja, who announced his retirement from Tesla earlier this year. Wheeler will assume the new position on Nov. 30, and Deepak will remain at Tesla for a few more months to help with the transition.

"What the Tesla team has achieved in building compelling alternatives in transport and energy is simply incredible. I am so excited to join an amazing team dedicated to such a broad and inspiring mission. Looking forward to jumping into the fast lane," said Wheeler.

McNeill is the former CEO of Enservio. Before leading Enservio, he co-founded Sterling Collision Centers, and back in 1993 McNeil founded First Notice Systems.

"Very few companies are literally changing the world for the better — Tesla is. I'm thrilled to join this incredible team," said McNeill.

Moving on to highlight some of the key points from the company’s conference call held Tuesday, some of the stats served to put investors’ minds at ease, according to industry analysts.

Karl Brauer, senior analyst for Kelley Blue Book, commented on Tesla earnings:

“When Tesla’s earlier claims of 55,000 deliveries in 2015 were adjusted down a few months ago, investors wondered if that reduction was a singular event or the start of a pattern of reduced delivery estimates. With the third quarter production numbers in, and Musk’s assertion that 50,000 to 52,000 cars will be delivered in 2015, investors are feeling less nervous and the stock reflects it,” he said. “There’s still the near-term issue of Model X production and Model 3 launch timing, both of which need to remain on schedule for Tesla to keep growing sales, but for now the company’s third quarter numbers appear ‘close enough’ to keep Wall Street happy.”

In the company’s Q3 shareholder letter, Tesla gave an update on its certified pre-owned program, as well.

According to the letter, the number of pre-owned Tesla vehicles sold in Q3 exceeded the number of customer trade-ins received, which resulted in a 17-percent reduction in trade-in unit inventory. Since the launch of the CPO program this past April, many analysts have been interested in how Tesla aims to source the certified program.

On the new side of the market, Tesla shared it delivered a record 11,602 new vehicles in Q3, while also launching the Model X and starting deliveries for this model, as well.

And since the launch of the Model X, the company’s first SUV, Tesla management shared order rates for both Model S and Model X vehicles is growing.

“Although it is too early to draw firm conclusions, this supports our belief that Model X expands the market for Tesla vehicles, with little to no cannibalization of Model S,” the letter stated.

Maintaining adequate supply of these vehicles has also been a concern for the company, but in Q3, the company exceeded its initial plan by producing 13,091 vehicles, including the first Model X vehicles — despite a one-week factory shut down to expand manufacturing capacity.

Tesla also directly leased 494 cars to customers in Q3, worth $45 million of aggregate transaction value, according to the shareholder letter.

Looking ahead to Q4, the company shared it expects to build 15,000 to 17,000 vehicles, and deliver 17,000 to 19,000 vehicles, which it said will result in 50,000 to 52,000 total deliveries for the year.

And the company is still on track to launch its Model 3, which will go for around $35,000, in late March 2016.

In analysis released earlier this fall when the Tesla X first launched, Edmunds.com director of industry analysis Jessica Caldwell said:  "There's little doubt in the marketplace that Model X will be successful with its audience of wealthy early adopters. But today's launch is a quick stop on a longer and more important journey.

 “The real test for Tesla comes down the road when it launches the Model 3, when we'll learn for sure if mainstream car buyers are ready to make the switch from gas to electric,” she added.

October used-vehicle sales may crack 3M units

SANTA MONICA, Calif. - 

While new-vehicle sales are expected to increase by over 11 percent for the month of October, TrueCar predicts a slight year-over-year decrease for total used-vehicle unit sales by the close of the month.

In an announcement from the company on Wednesday, TrueCar says it expects that total used-auto sales may exceed 3,023,686 units, which, if that figure comes to fruition, would be a 2.3 percent decrees compared to October 2014’s results a year ago.

The prediction includes potential used-vehicle sales from franchised and independent dealerships as well as private-party transactions.

The company predicts total revenue from new- and used-vehicle sales in the U.S. to rise by 7 percent this year, resulting in an all-time industry record of $1.2 trillion. That would include a total of 55.8 million new and used cars and light trucks for the year, a 4.2 percent increase over the 53.5 million units retailed in 2014.

“The industry remains hot with October marking the third month this year of double-digit growth,” said Eric Lyman, TrueCar’s vice president of industry insights. “Interest rates are still low, which helps move vehicles off lots for consumers ready to buy. Automakers’ promotions also sweetened the deal as the model-year close-outs carried over from September.”

 

Lithia edges closer to used sales goal

MEDFORD, Ore. - 

Lithia’s leadership has been long touting a goal to average 75 used-vehicle sales per store per month. At the end of the first quarter this year, the group was sitting at roughly 57 units per store.

By the end of September, Lithia’s monthly average has seen a solid gain.

“On a 12-month rolling average, we sold 61 used vehicles per store, up from 55 units in the comparable period last year,” said Bryan DeBoer, the company’s president and chief executive officer. “Our goal to retail 75 used units per store still provides considerable upside in the future.”

Aside from the company’s industrious acquisition strategy, DeBoer says the group is also focusing on strengthening internally.

“We continue to grow used-vehicle sales as inventory resupply increases in the marketplace,” DeBoer said. “Additionally our stores continue to recruit and develop used-vehicle managers with the ability to source, recondition and merchandize used inventories.”

According to the company, several used-vehicle metrics jumped in the third quarter. Here’s a brief breakdown of Q3 same-store results from DeBoer that weren’t specified in the company’s released results:

  • Certified unit sales increased 19 percent
  • “Core” unit (aged 3-5 years) sales increased 8 percent
  • “Value Auto” unit (mileage over 80,000 miles, any age) sales increased 5 percent

With its used-vehicle sales leading the way in revenue stream increases in Q3, DeBoer also mentioned that the company’s used-to-new sales ratio was brought up to 0.83:1.

So how will the seasonal trend of increased supply affect Lithia’s pricing scheme?

“If we look at residual values and we look at what we believe will be future trends, what we're starting to see initially is that there’s starting to be increase supplies in used vehicles,” DeBoer said. “So off-leased vehicles are becoming more prevalent, which would give indication that values may soften a little bit as supply begins to loosen. And I think those trends may continue as the SAAR rates continue to climb as well.”

Sidney DeBoer, the company’s founder and executive chairman, agreed on the pricing situation and clarified his outlook.

“This is kind of a stable position that we’re in now,” he said. “There are no extremes.”

Speaking of lease returns and the large contingency of them anticipated to hit the market, an analyst asked if that would  affect the number of used inventory units that Lithia will hold on to.

“Personally, I don’t think so,” Bryan DeBoer said. “I think that helps you grow your business but I don’t think you’re going to reduce your overall inventories because of that because we’re still trying to grow core and valued autos, as well. And remember, core is over half of our business. So even as those off-lease cars grow, I really believe no, it’s not going to affect the inventories.”

DCH integrating well

Lithia’s purchase of one of the largest dealer groups in the country, DCH Auto Group, closed a little over a year ago, representing one of the largest dealership acquisitions in recent history. Using a baseball metaphor this week, DeBoer says it may very well be one of the most painless purchases Lithia has ever made.

“In terms of what inning we’re in, in terms of integration, I would say that we’re in the middle innings. I believe they know who they are and what they want to become,” DeBoer said. “They have a wonderful culture. They are humbly confident, much like we had talked about.

“And I can say this: I think it was the smoothest integration that we may have ever had on an acquisition, including the small ones that were $30 million. This, at $2.4 billion, was really pleasing to see that our two organizations, who if you recall knew each other historically but never were really together at this level, we’re proud to have them as our teammates and companions.”

Want to read more on Lithia’s ongoing acquisition strategy? Check out our story here.

Used sales growth leads Lithia’s record Q3 earnings

MEDFORD, Ore. - 

Lithia reported its best-ever third-quarter earnings in company history this week. Leading the way? Used-vehicle sales.

Looking at its third-quarter operating highlights, Lithia’s used-vehicle retail sales on a same-store level increased by 13 percent compared to Q3 2014, representing the biggest jump of the four different metrics that experienced double-digit growth quarter-over-quarter.

Lithia’s president and chief executive officer, Brian DeBoer, explained.

"Our third quarter earnings were the highest in company history," DeBoer said in Lithia's earnings release. "Same-store sales in all four business lines grew by double digits, led by a 13 percent increase in used-vehicle sales. Total revenues increased 61 percent and adjusted earnings per share increased 54 percent over the prior year period.

"A robust new-vehicle sales environment, improving supply of late-model used vehicles, and the continued growth in our service, body and parts business is allowing our store leaders to unlock new opportunities to improve performance across our company. We remain positive on the overall outlook for both organic and acquisition growth in 2016."

Take a glance at the used-vehicle results below — broken down and separated by overall and same-store results — to get an idea of the impact of Lithia’s newly acquired stores had on the group overall in the third quarter and the year so far.

Q3 Glance at Used-Vehicle Results
Revenue (in thousands) 2015 2014 % Change
Used-vehicle retail (consolidated) $505,885 $340,522 48.6
Used-vehicle retail (same-store) $381,773 $338,400 12.8
Unit Sales      
Used-vehicle retail (consolidated) 26,206 17,710 48
Used-vehicle retail (same-store) 19,255 17,566 9.6
Average Gross Profit Per Unit      
Used-vehicle retail (consolidated) $2,377 $2,479 (4.1)
Used-vehicle retail (same-store) $2,546 $2,489 2.3
YTD (Q1-Q3) Glance at Used-Vehicle Results
Revenue (in thousands) 2015 2014 % Change
Used-vehicle retail (consolidated) $1,457,617 $952,890 53
Used-vehicle retail (same-store) $1,071,691 $943,360 13.6
Unit Sales      
Used-vehicle retail (consolidated) 75,099 50,112 49.9
Used-vehicle retail (same-store) 54,197 49,537 9.4
Average Gross Profit Per Unit      
Used-vehicle retail (consolidated) $2,456 $2,569 (4.4)
Used-vehicle retail (same-store) $2,614 $2,579 1.4

DeBoer commented on the continued expansion of his group, adding during the conference call that the company is still open to acquisitions of all sizes as they come along.

"We have purchased or opened six stores in 2015 which will add cumulative annual revenues of approximately $220 million,” DeBoer said. “We are actively seeking stores in both our Lithia exclusive market strategy and in our DCH metropolitan market strategy. The acquisition market remains robust and we anticipate further transactions for both Lithia and DCH in the near term."

To check out Lithia's full third-quarter results, click here.

2 used sales forecasts have September figure topping 3M

CARY, N.C. - 

With part of the new-model sales prediction chatter associated with the Volkswagen diesel controversy, a pair of used-vehicle sales projections indicated that side of the market should top 3 million in September.

The analysts at TrueCar are even more optimistic, thinking total used-vehicle sales — including franchised and independent dealership turns and private-party transactions — may exceed 4,328,643 units. Should the market hit that figure, it would represent a 3.2 percent gain year-over-year.

Edmunds.com also offered a used-vehicle sales forecast for this month, but analysts there are projecting sales won’t be that high in September. The site reported an estimated 3.01 million used vehicles will be sold in September for a seasonally adjusted annual rate of 37.5 million. That’s compared to 3.21 million — or a SAAR of 36.7 million — used-vehicle sales in August.

More industry observers offered their takes on what the new-model sales market might do this month, and many touched on the impact the VW leadership shakeup might do.

“Volkswagen’s deception is dominating headlines, but it is not keeping shoppers away from other brands’ showrooms,” said Edmunds.com director of industry analysis Jessica Caldwell, who put the site’s new-car sales forecast at 1,415,436 units to be sold in the U.S. in September for an estimated SAAR of 17.8 million.

“It puts the crisis in a little bit of perspective, since these Volkswagen diesels don't constitute a very big share of sales,” Caldwell continued. “It’s also a reminder that buyers won’t disappear from the market just because they suddenly can't or don't want to buy these affected cars. They're willing to turn to other automakers that will meet their needs.”

Edmunds’ new-sales prediction would represent a 10.1-percent decrease from August but a 13.9 percent increase from September of last year. However, the site’s projection would make this month’s sales volume the biggest September since 2004, and the sales rate will be the biggest September SAAR since 2000.

Back at TrueCar, analysts are projecting the new-car SAAR should reach 17.7 million units in September versus 16.5 million units a year ago, the highest in more than a decade, led by robust retail sales.

“Labor Day and model year-end promotions combined to create an impressive outcome this month,” said Eric Lyman, TrueCar’s vice president of industry insights. “September’s sales pace underscores the strength of the auto sector’s continued expansion and our confidence that full-year sales will reach 17.2 million units in 2015.”

TrueCar added that Volkswagen may be an outlier this month, following news that software on the automaker’s diesel models was altered to allow the vehicles to pass emissions tests. Sales of TDI diesel models have been suspended, and analysts noted that VW’s volume may fall 5.2 percent in September.

“With 27 percent of VW sales coming in the form of TDI-equipped cars, we expect an immediate impact on the brand until the stop-sale on TDI vehicles ends,” Lyman said.

Kelley Blue Book analysts shared that they expect new-vehicle sales to increase 12 percent year-over-year to a total of 1.39 million units in September 2015, resulting in an estimated 17.5 million SAAR.

At 1.39 million units, KBB said this will be the highest September sales volume since 2006.

Kelley Blue Book senior analyst Alec Gutierrez noted that dealers should expect big increases across the industry in September, with the average gains from manufacturers in the double digits. 

Including Labor Day sales with September totals this year is one reason for the big jump, but Gutierrez explained the underlying demand for new vehicles remains strong.  With the average age of vehicles on the road increasing, used-car prices on the rise and financing still inexpensive, he said it looks like new-car sales will continue to increase in the near future.

"While the Volkswagen scandal will have a negative impact on sales, the affected models represent less than a quarter of their portfolio, and some dealers have already depleted their stock of those units,” Gutierrez said.

“The larger issue is the hit the automaker's brand image and perceived trustworthiness, which may affect sales of their other models,” he continued. “We think the effects on September sales won't be too bad for Volkswagen Group's combined sales, but October and beyond could be another story.”

Finally, the monthly sales forecast developed jointly by J.D. Power and LMC Automotive has September with a new-vehicle sales total approaching 1.2 million units, a 10.2 percent increase on a selling-day adjusted basis compared with September of last year, and the strongest sales volume for the month of September since 2004 when sales reached 1.2 million units.

The forecast from J.D. Power and LMC Automotive pegged the SAAR for September reaching 14.9 million units, an increase of 1.2 million units from the selling rate last September and the highest for any month since July 2005

“Having Labor Day sales count in September definitely gives the month a tremendous lift,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. “On a selling-day adjusted basis, sales through the Labor Day weekend were 72 percent stronger than the same time last year.”

As a result of the vigorous selling pace during the spring and summer months — the selling rate from May through August averaged 17.5 million units — LMC Automotive is raising its 2015 total light-vehicle sales forecast to 17.2 million units from 17.1 million units and its retail light-vehicle forecast to 14.1 million units from 14.0 million units.

“The Federal Reserve’s decision to keep interest rates at the current level paves the way for the U.S. auto market to post strong results for the remainder of 2015, as the primary risk to volume — a rate increase — is likely pushed out to December or early 2016,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive.

“Sales the previous three months have significantly exceeded expectations, so if interest rates remain low, auto sales in 2016 will get a further boost from an economy that should accelerate,” Schuster added.

2 views of what Wall Street volatility means in auto

ATLANTA and SANTA MONICA, Calif. - 

With the stock market wobbling at times recently more than that beater on your lot with the really bad tires and alignment, Cox Automotive chief economist Tom Webb and Edmunds.com director of industry analysis Jessica Caldwell each took a turn to consider implications in the auto world.

Webb acknowledged when he was assembling the August Auto Industry Brief that it is “bind of hard to write a monthly brief on a Friday afternoon when the Dow has just plunged 531 points,” referring to the Aug. 21 decline. 

The Cox Automotive expert recollected about what he compiled a month earlier, stating “international markets continue to haunt.” Webb along with many Wall Street observers attributed the stock market’s recent behavior to what’s happening in China and elsewhere around the globe.

“Those forces have now become more than an ephemeral apparition,” Webb said. “Real dollars are flowing, real equity has been destroyed, real risk premiums are rising, and financial markets are unprepared to digest even long-anticipated, and long-overdue, policy shifts. What’s a forecaster to do? Put on the blinders and proceed ahead, trusting that the outside forces will not derail our slow movement forward? Such trust would not be unfounded.

“The U.S. has no excesses or imbalances building up in its economy,” he continued. “Labor market conditions are not spectacular, but they are solid. Credit markets (domestically at least) are also performing well. And the auto industry is outperforming the overall economy.”

Webb then pointed out the specific areas where the auto industry is providing an economic highlight for the entire country.

“New-vehicle sales are up with the aid of some, but not an excessive, increase in incentives. Wholesale used-vehicle pricing remains firm, and dealer retail activity is generating strong profits as a result of increased operating efficiencies,” Webb said.

Those new-vehicle sales in August might not as strong as a year ago since auto sales from Labor Day weekend were included in last August’s results. Meanwhile this year, they will be parceled into September 2015 sales.

Still, Caldwell from Edmunds doesn’t believe any sales softening will stem from Wall Street swings. Edmunds forecasts that 1,538,958 new cars and trucks will be sold in the U.S. this month for an estimated seasonally adjusted annual rate (SAAR) of 17.4 million. The projected sales will be a 2.1-percent increase from July, but a 2.8-percent decrease from August of last year.

“Sales momentum in August has been strong despite recent stock market fluctuations,” Caldwell said.  “The fact that we will likely see a year-over-year decline in sales isn’t a troubling sign because last August was a monster month that included Labor Day weekend.”

What the Fed might do with interest rates

In his latest brief, Webb also touched on what the Federal Reserve might to do interest rates, which eventually could impact activity in the F&I office.

Webb recapped that a couple of months ago, the majority of analysts were expecting the Fed to raise the targeted federal funds rate in September. By the middle of this month, Webb called that view as only “a 50-50 proposition.”

And, with international financial markets becoming increasingly volatile, even before the selloff in equity markets, Webb added that the futures market was betting on only a 33 percent chance of a rate hike.

“If markets don’t calm between now and the Sept. 16-17 Fed meeting, expect another pass on the rate hike,” Webb said.

Meanwhile the analysis team at Comerica Bank generally agreed with Webb’s position in an economic update posted on Friday.

The Comerica Bank team that includes chief economist Robert Dye said, “financial markets are firmly focused on the Federal Reserve, anticipating what policy makers will do at the upcoming September 16-17 FOMC meeting. We believe that the most likely timing for the first fed funds rate increase is still September, but that is not written with overwhelming conviction.

“We would place the odds of a September rate increase at 30 percent. Late October gets 25 percent and mid-December gets 20 percent, leaving 25 percent for all of 2016. The flattish probability distribution reflects the potential for more financial market stress in the near term,” the bank team went on to say.

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