Sales Forecasts

Used sales expected to climb; calendar throws off new market

SANTA MONICA, Calif. - 

After TrueCar announced its prediction for a 3.8-percent year-over-year increase in used sales last week, further forecasts for August results came pouring in.

Like this prediction from Edmunds.com: the company expects an estimated 3.22 million used cars to be sold in August, which represents a SAAR of 36.8 million.

According to Edmunds data, this is slightly down from July used sales of 3.24 million for a SAAR of 37.1 million used-car sales.

And both Edmunds and J.D. Power revealed their new-car forecasts for the month, as well.

Edmunds is predicting 1,538,959 new cars and trucks will be sold in August for an SAAR of 17.4 million, which marks a 2.1-percent increase from July, but also a 2.8-percent slide year-over-year. The site estimates that the retail SAAR, in particular, will come in at 15.3 million vehicles in August, with fleet transactions accounting for 12.1 percent of total sales.

And in a report from J.D. Power and LMC Automotive, the two companies predicted retail new-vehicle sales to hit 1.3 million units in August, marking a 1.2-percent decrease year-over-year and a retail SAAR of 13.7 million units.

Both Edmunds and J.D. Power both cited a change in the sales calendar as one of the factors behind expected year-over-year slips in new-vehicle sales.

For the first time since 2012, new-vehicle sales over the Labor Day weekend will be part of September’s sales and not included in August numbers.

Of course, as J.D. Power analysts pointed out, Labor Day weekend is traditionally the biggest new-vehicle sales weekend of the year, so this calendar discrepancy stands to make an impact.

In fact, according to J.D. Power data, in 2014, the Labor Day holiday weekend coincided with the close of the August sales month, pushing that weekend's sales to 278,878 units, or 20 percent of August sales.

Speaking on the same topic, Edmunds' director of industry analysis Jessica Caldwell didn’t seem to concerned, noting, Sales momentum in August has been strong despite recent stock market fluctuations,

She added: “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.” 

John Humphrey, senior vice president of the global automotive practice at J.D. Power, assured the industry, as well, there is no cause for “alarm.”

"On a year-over-year basis, August sales are going to appear weak, when in fact it's really a variance in the numbers created by the calendar," he said. "There certainly is no cause for alarm. In fact, the daily selling rate month-to-date in August is trending 8 percent higher than the same period a year ago, although we do anticipate the absence of the holiday in August sales will diminish that rate by the end of the month.

"Our expectation is that with Labor Day falling in September, sales that would have occurred this month are being pushed into next month. If that happens, September will move sales back to the strong trend line we've been seeing throughout the year,” Humphrey added.

As far as the sales volume forecast by manufacturer, Edmunds.com expects General Motors to come out on top with 269,759 new sales, followed by Ford with 225,834 units sold. Toyota is expected to be up next with 216,526 new-vehicles sold, with FCA in the No. 4 spot with an expected 199,091 sales. Rounding out the top five, according to Edmunds predictions, will be Honda with 156,962 new sales in August.

As for what’s in store for the next few months, the J.D. Power and LMC Automotive report pointed out a “robust performance” in July is helping drive a positive outlook for new-vehicle sales, despite the expected decline in August.

LMC automotive also pointed out a larger economic factor — recent stock market upsets — doesn't seem to be affecting the auto industry, causing the company to stick to its 2015 total light-vehicle sales forecast of 17.1 million units.

"The current stock market volatility does not seem to be having much of a negative impact on consumers as the selling rate remains well above 17 million units," said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "Upside potential for the U.S. auto market is gaining momentum, as it now looks unlikely there will be an interest rate increase in September, and a delay in rising rates will most certainly assist in keeping growth on track."

Used sales expected to spike 3.8% amid slowing new market

IRVINE, Calif. and SANTA MONICA, Calif.  - 

As September nears, both TrueCar and Kelley Blue Book are predicting new-car sales declines this month, while the number of used cars retailed is expected to grow.

According to TrueCar, total used sales, including franchised and independent dealerships and private-party transactions, may exceed 3,353,742, which would mark a 3.8-percent year-over-year increase.

The story is a bit different on the new side of the business.

KBB is predicting new-vehicle sales to drop by 4 percent year-over-year this month with a total of 1.52 million units sold resulting in an estimated seasonally adjusted annual rate of 17.2 million.

Over at TrueCar, the company is forecasting total new sales, including fleet deliveries, might decrease by 2.9 percent year-over-year, but it is predicting the SAAR should reach 17.4 million units this month versus 17.3 a year ago — even with a slight decline in volume.

According to both reports, the week Labor Day falls on this year is playing a role in expected declines.

Last year, auto sales from Labor Day weekend were included in August results, while this year, they will be parceled into September 2015 sales. Also, there are 26 sales days in August 2015, compared to 27 sales days in August 2014.  

“Despite the tough comparison with last August, robust demand for crossovers and pickup trucks continues this month and the industry is right on plan to hit our revised 17.2 million-unit projection for 2015,” said Eric Lyman, TrueCar’s vice president of industry insights. “Last August was a very strong month, with a built-in sales bump from Labor Day. With the Labor Day delay, we anticipate a lot of buying activity in September.”

According to KBB, due to the exclusion of Labor Day in August sales results, the company expects most automakers to report sales decline in August — with one exception.

KBB analysts explained that with Ford’s F-150 growing both in sales and available inventory, the automaker could see an increase in sales in August, following a “slow launch” earlier this year.

And TrueCar reported Kia Motors America as the expected sales leader among major automakers with a forecasts increase in new sales of 5.2 percent.

According to the KBB report, retail sales are forecasted to make up 88.8 percent of new-car sales volume in August, up from 88.2 percent last year.

Alec Gutierrez, senior analyst for Kelley Blue Book, also pointed out that in looking at predicated August results, one must look outside the U.S.

"While the outlook for August remains bright, we must keep an eye on the financial markets which have declined precipitously in the last few weeks on uncertainty in international markets, namely China," he said.  "We remain confident that sales in August will remain robust; however, should the U.S. financial markets continue to falter, we could see demand for new cars soften in the short to medium term.  It should be noted that the unemployment rate in the U.S. remains below 6 percent, while the auto finance environment remains as attractive as ever, so we don't necessarily expect to see the sales pace deviate from its current 17 million-plus SAAR trajectory for 2015 unless the stock market continues its downward trajectory in the weeks and months to come."

As for what segments will see the most sales this month, KBB anticipate the compact utility segment will continue to see sales soar while the car segment market share might suffer a bit.

KBB expects compact SUV/crossover new sales will reach 225,000 this month for a year-over-year increase of 7.7 percent. On the other hand, the mid-size car segments is predicted to see a 9.4 percent decline from last year, while compact car sales will likely decline by 7.5 percent.

"Kelley Blue Book anticipates that the compact utility segment will top all others in August.  With a host of new models at price points around $20,000, and with gas prices remaining reasonable, this segment has never been more popular," said Gutierrez.  "As a result of moderate gas prices and increased interest in utility vehicles, we expect market share for cars to fall once again in August.  Year-to-date, sales of cars comprise 44.5 percent of the market, whereas they made up 47.3 percent of sales last year." 

 

Subcompact SUV, crossover marketing takes aim at Gen Y

MOUNTAIN VIEW, Calif. - 

Manufacturers of subcompact SUVs and crossovers, worldwide, have a specific demographic in mind when marketing these types of vehicles: young adult, educated, entry-level shoppers.

That’s according to a recent analysis by Frost & Sullivan, titled Strategic Analysis of the Global Subcompact SUV and Crossover Market, which presents an analysis of the two areas of significant growth in recent years and its projected continued growth over the next few years.

The analysis reveals that between 2012 and 2014, the market for these two types of vehicles grew by over 40 percent, with worldwide new-vehicle sales of subcompact SUVs and crossovers coming in at 3.2 million units from 62 models in 2014. The firm expects that figure will increase worldwide by 7.4 million units, with 22 additional models, by 2022.

Focusing primarily on millennials aged 18 to 36 years of age, the study predicts that manufacturers will be aiming to sell these vehicles to educated individuals, either single or in couples without infants, who perceive themselves as adventurous urban dwellers who are also seeking a vehicle that is tech-savvy, safe, efficient and optimally spacious. It also has to look good for a reasonable price.

“The key to market success is to provide customers with (a) strategic balance between manufacturer’s suggested retail price/selling price and trendy design cues,” said Sujeesh Kurup, Frost & Sullivan’s automotive and transportation consultant.

The price point is important, as the study reveals that the target demographic will be most comfortable with spending roughly $20,000 for a vehicle in this category, suggesting that those not specifically fixated on purchasing a new vehicle will probably gravitate toward the used-vehicle market if the newest of the new technologies aren’t the pinnacle of their shopping needs.

The price also affects which makes these young, thrifty shoppers will be looking in, as the study forecasts that there will be more mass-market vehicles than premium vehicles by 2022.

The biggest challenge for this audience will likely be in the area of fuel-efficiency, where the current combined value of miles per gallon is roughly 25 miles per gallon. The firm expects that the combined value of mpg in this area of vehicles to rise to about 30 mpg by 2022.

Kurup also commented on the importance of platform consolidation for manufacturing price streamlining.

“Finding the optimal balance between platform consolidation, lightweighting and vehicle fuel (efficiency) may well prove critical to (an) OEMs’ growth,” Kurup said. “They need to focus on these areas not only to meet their business goals, but also to be able to offer customers a great value proposition.”

To check out the full review from Frost & Sullivan, click here.      

Franchised dealer count & sales throughput climbs

DETROIT - 

Not only are there more franchised dealerships in the United States than there were at the end of 2014, but the average number of new-vehicle sales per dealership is also trending toward an all-time record.

That’s according to statistics from Urban Science, which has released its 2015 midyear Automotive Franchise Activity Report.

The data shows that the number of franchised dealerships at the beginning of July showed a 0.3-percent increase from the end of 2014, up to 18,011 rooftops total in the nation.

According to the report, the throughput of those dealerships is trending to achieve an all-time record of 945 units per rooftop, resulting in the anticipated 17.1 million new-vehicle unit sales forecasted by LMC Automotive.

If achieved, the all-time high would tally the fourth consecutive year that U.S. dealerships maintained a throughput record.

While there was a slight increase in the number of rooftops, the number of franchises also increased by 0.3 percent since the end of 2014, up to 31,714 as of the beginning of July.

Mitch Phillips, the global director at Urban Science, believes the throughput record is very much likely to be broken this year.

“Dealership and franchise counts remain stable throughout the first half of 2015,” Phillips said. “Most local markets have not seen any net change in dealership counts at all.

“Breaking the sales throughput record looks promising,” he continued. “With a strong industry forecast and this stable dealer count, we are on track to top the 2014 record.”

Looking at individual states, Texas has seen the biggest increase of 10 dealerships this year. The Lone Star State is followed by California (8) and Florida (7), then Iowa, Maryland and Virginia (5 each).

Used-car sales likely above 3.2M for July

CARY, N.C. - 

Look for used-vehicle sales this month to be north of 3.2 million units, say industry analysts. TrueCar and Edmunds.com each released separate analyses this week forecasting July used-car sales in that ballpark.

Edmunds is predicting 3.22 million used sales this month, which would result in a seasonally adjusted annualized rate of 36.9 million.

Meanwhile, TrueCar predicts the monthly sum may go above 3.24 million.

These forecasts include used-car numbers from private-party sales as well as those from franchised and independent dealerships.

Drilling down into some earlier numbers, Cox Automotive chief economist Tom Webb blogged Wednesday about a specific set of dealers — those at the seven publicly traded groups — and the run of success they have had over the past six years.

With many of the public retailers reporting second-quarter results last week, Webb found that this group (Asbury Automotive Group, AutoNation, Carmax, Group 1 Automotive, Lithia Motors, Penske Automotive Group and Sonic Automotive) has now gone 24 straight quarters with increases in same-store retail used unit sales.

“On a sales-weighted basis the gain was 6.9 percent — the best since fourth quarter of 2013,” Webb wrote.

However, perhaps tempering some of that excitement was this: the period marked a new low for average gross margins, Webb said. He also pointed out that there was no real year-over-year change in average used retail selling prices (both of these metrics were also on a sales-weighted basis).

11.5% used margin repeat not likely

ATLANTA - 

Cox Automotive chief economist Tom Webb is confident the used-vehicle industry will eventually surpass the all-time sales record sometime in the coming years; a feat that would require eclipsing the mark of 44.14 million units CNW Research indicated was established 10 years ago.

But a return of double-digit margins for dealers on those used-vehicle turns? Webb isn’t sure the rare heyday of margins above 11.5 percent seen back in 2009 will ever be enjoyed again.

Webb attributed part of the reason why used sales should top the all-time record is growing volumes of off-lease vehicles, which is already fueling the certified pre-owned market to sterling figures.

The latest data from the National Automobile Dealers Association shows 4.4 million used vehicles turned in June, pushing the total at the halfway point of 2015 to close to 18.6 million used sales.

While the pace would have to intensify during the second of this year to approach the record set in 2005, Webb indicated during his recent quarterly conference call that the majority of factors influencing used sales such as financing and inventory availability “are becoming better.”

The growing sales volume is helping dealerships enjoy record profits for the used operations. That’s despite margins rebounding only slightly this past quarter after bottoming out during the second half of 2014, according to Webb’s tracking of the seven publicly traded dealer groups that he says provides a barometer for how the entire industry is performing.

Going back eight years, Webb pegged the margin high at above 11.5 percent during the worst of the recession in late 2008 and early 2009. Since that time, margins for these dealer groups have drifted lower, settling at just about 9.5 percent this past quarter.

Webb cautioned that the margin peak “was very much an anomaly related to the recession and the supply of units, the volume of units being sold and holding out for gross.”

He continued with, “Rather being overly concerned about the margin compression, I would point out that when a competitive industry like auto retailing achieves greater efficiencies, and they certainly have, some of those savings are passed on to the consumer in the form of lower margins.

“But as the growth in throughput stalls and those further efficiencies seem harder and harder to achieve, it is important that we in the industry continue to look at where the pain points are and develop solutions to relieve them,” Webb added.

Webb also mentioned that while his dealer group margin data only goes back eight years, he insisted that if he had information “going back decades and decades,” the margin metric would show a long-term downward trend.

“It’s something we just have in the industry. Margins go down; they don’t really come back up,” Webb said.

“But again, that’s doable because you have great efficiencies, greater throughput overall,” he continued. “You’re still getting great F&I income. At these margins, you’re still making record profits. I would say we start might start to bottom out in terms of overall margins and they only go down further to the extent that the industry achieves even great efficiencies.”

Automakers target convertible fans

McLEAN, Va. - 

It appears as though Independence Day weekend is the ideal time to target the summer whims of convertible lovers.

That’s according to an analysis from NADA Used Car Guide released Thursday, which highlighted a few manufacturer financing incentives that should prove particularly appealing to July 4 shoppers who enjoy the top-down side of life.

“If horsepower and performance are on their requirement list, shoppers might consider 72 months of zero percent financing on Chevrolet’s Camaro,” said Larry Dixon  of NADA Used Car Guide. “Paying nothing in interest over the life of a loan helps you reach a positive equity position sooner.”

NADA Used Car Guide’s executive analyst Jonathan Banks added: “If your taste in vehicles changes often and you don’t want to put any money down on a purchase, Mazda is leasing their MX-5 (Miata) roadster for 24 months with nothing down.” 

Here are a few other top-down suggestions from NADA Used Car Guide:

  • MINI Cooper S Convertible or Cooper S Roadster – 1.9 percent APR for 36 months from MINI Financial Services, with no payments for up to 90 days.
  • Volkswagen Beetle Convertible – 0.9 percent APR for 60 months.

For a list of solid convertible options for both new- and used-vehicle shoppers, check out the organization’s Perspective: New and Used Convertibles for Under $35,000 here.

NADA: Rising used supply, lower prices by 2017

McLEAN, Va. - 

Dealers should expect a sharp increase in late-model used-vehicle supplies along with significant decreases in used-vehicle values over the next couple of years.                                      

That’s according to the National Automobile Dealers Association, which hosted its Economic Quarterly press briefing on Monday to recap the first half of the year and set its gaze forward.

The NADA’s current forecast estimates that the supply of late-model vehicles, which it specifies as zero- to 5-year-old vehicles, will be 28 percent higher by 2017 than at the end of 2014.

The association’s projection, based on the expectation of increased used-vehicle supply and pressure from new-vehicle sales, would result in a 4.5-percent decrease in used-vehicle prices per year in 2016 and 2017.

Larry Dixon, senior manager of market intelligence for NADA Used Car Guide, said that used-vehicle prices have remained relatively stable up until now despite the ever-present pressure from new-vehicle sales and increased supply of late-model vehicles. He expects the decline in used prices to be relatively tame for the rest of the year.

“NADA forecasted a slight decline of 0.3 percent for used prices of vehicles up to 8 years in age through the first half of 2015, so the year’s result so far has essentially played out as we have expected,” Dixon said. “We expect used-vehicle prices to decline by 2 percent over the second half of 2015 compared to levels recorded year-to-date.”

These comments followed NADA chief economist Steven Szakaly’s review of the new-vehicle industry. On that front, NADA increased its sales expectations for 2015 from 16.94 million to 17.17 million units. Szakaly expects 2016’s results to be a peak; he forecasts a total of 17.62 million new cars and light trucks will be sold next year.

“Purchases and leases of new cars and light trucks will continue as a stronger overall economy continues to drive demand,” Szakaly said. “While we’ve had a slower-than-normal recovery from this recession, we are seeing the sixth consecutive year of new light vehicle sales growth.”

June's used-car sales picture

CARY, N.C. - 

After quite a strong May for used-vehicle sales (at least among franchised dealers), how is June shaping up? That’s the question a couple industry observers are looking at as the month winds down.

Edmunds.com is estimating June used-car sales (across all channels: franchised and independent dealers, plus private-party figures) will reach 2.98 million. This would result in a used SAAR of 37.2 million; last month, Edmunds pinpointed used sales at 3.07 million with a SAAR of 37.4 million.

Next up, TrueCar forecasts that there may be more than 3.33 million used-vehicles sold in June, which would beat year-ago figures by 8.4 percent.

As for May, the National Automobile Dealers Association announced earlier this month that there were roughly 4.02 million units, compared to an even 4 million in May 2014.

This brought the year’s tally just past 14 million used cars and light trucks, putting 2015’s pace thus far just slightly behind 2014’s, where total used sales passed 14.1 million units by the end of May 2014.

“Private-party sales of used vehicles have declined this year,” Steven Szakaly, NADA’s chief economist, said when the report was released. “The cold winter combined with a wetter than usual spring dampened sales by individuals. New-car dealers, on the other hand, clearly benefitted from the increase consumer traffic during Memorial Day sales events that brought new car buyers in to shop for both new and used vehicles.”

To put that in perspective, new-vehicle dealers sold 1.52 million used units in May, a 3.6 percent increase year-over-year, while used-car dealers and private-party sales each declined 1.6 percent, respectively, compared to 2014.

Used-vehicle dealers sold 1.29 million vehicles in May; private parties sold 1.21 million units for the same month.

Editor's Note: Staff Writer Josh Hyatt contributed to this report.

 

 

Memorial Day Prep: Used-Vehicle Predictions

SAN CLEMENTE, Calif. - 

In the hopes of helping dealers prepare for the anticipated surge of sales for the holiday weekend, the team at DealerSocket assembled data from last year’s Memorial Day activity to help give dealers a better idea of what to expect this year, including the kind of profits they may see in their used-car operations.

Here’s an overview of some of the statistics, created from DealerSocket's insights into the data from 950 of it's dealer customers, to help dealers gain some perspective of their own on potential areas of focus for the upcoming Memorial Day holiday as well as shed some light on last year's used-vehicle sales successes.

Used Vehicles Made More Money

  • The average total profit from used vehicles, versus new vehicles, was higher for Memorial Day 2014.
    • New-vehicle average: $1,360
    • Used-vehicle average: $2,152
       
  • More shoppers made test-drive appointments for used cars.
    • Appointments set from new-car leads: 20 percent
    • Appointments set from used-car leads: 35 percent
       
  • The percentages for appointment confirmations, show rates and sell rates were nearly identical for used and new vehicles.
    • Appointment confirmation rates: 54 percent for new, 53 percent for used
    • Appointment show rates: 66 percent for new, 64 percent for used
    • Sales from appointments: 19 percent for both new and used

Cleaning Up Your Phone Operations

  • Have a good inbound phone process: 89 percent of phone leads yielded a scheduled appointment. DealerSocket recommends always asking for an appointment — it can’t hurt to ask.
     
  • On average, it took one more follow-up call to close a used-vehicle sale versus a new sale.
    • Average number of outbound calls for new: 1.8.
    • Average number of outbound calls for used: 2.6.

Last Year, Economy Cars Were King

  • Economy cars (new and used combined) had some of the highest close rates from new leads for Memorial Day 2014.
    • Scion: 66 percent close rate
    • Fiat: 56 percent
    • Mini: 53 percent
    • Hyundai: 50 percent

The Floor Made the Most Money

  • Average total profit, for both used and new sales, by lead sources:
    • Floor: $1,810
    • DealerSocket’s RevenueRadar: $1,674
    • Phone: $1,622
    • Internet: $1,401

More information about DealerSocket’s offerings can be found it the company’s website.

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