Beige Book: Loosened Credit Helps Dealers Report Healthier Sales
WASHINGTON, D.C. — By and large, the auto markets throughout country have shown signs of improvement, according to the latest Beige Book report. The report shows that eight of the 12 Federal Districts have seen an upswing in vehicle sales.
Specifically, the New York, Philadelphia, Atlanta, Chicago, St. Louis, Minneapolis, Dallas and San Francisco districts have had stronger auto sales, as of late. Meanwhile, the market is Cleveland was described as "decent."
Dealers in Kansas City reported stable sales and Richmond saw "mixed" results.
"Several districts noted that favorable pricing and credit terms helped lure buyers into showrooms," the Federal Reserve reported.
The Fed then broke down how each area of the country is faring, beginning with the First District.
Though not reporting an auto-specific data, the retail market, in general, in the First District has been strong to start the year. The Fed noted that "year-over-year same-store sales vary from flat to increases of about 20 percent, with ‘improved sales tone' across the board.
Officials added: "Contacts attribute the uptick in sales to strengthening consumer confidence, strong marketing, and having ‘the right product and the right price.' All respondents are cautiously optimistic in their outlook."
In the Second District, the auto market was "sluggish" in February, and then vehicle sales made some strides in March. Dealers are also reporting strong service revenues.
"Credit conditions for car buyers have continued to improve, though floor-plan credit (for dealers) remains tight," the Fed pointed out.
Dealers have seen stronger sales in the Third District, and predict they will remain above year-ago totals. Area dealers also told the Fed that they have good control over their inventories and see spring sales remaining on an incline.
The report even indicates that some of the dealers cut by domestic OEMs will regain their franchise rights "in the months ahead."
"In general, dealers are maintaining their expectations that total sales for this year will be slightly ahead of last year," the Fed said.
Vehicle sales were "decent" from mid-February to the middle of March and relatively static compared to the same period of 2009. Also, used-vehicle sales have been stable.
Dealers anticipate the second quarter will show a "modest … at best" upswing in overall sales.
"Dealer inventory positions have improved since our last report, though a few dealers still characterize it as light," the Fed stated. "Several contacts told us that buyer credit is beginning to loosen, as community banks and credit unions are becoming more aggressive. Reports show little change in staffing levels at retailers or auto dealers."
In the Fifth District, there were largely "mixed" markets. For example, the Carolinas and West Virginia enjoyed heavier sales, but dealers throughout the rest of the region saw "tepid" results.
Moving on, dealers in the area have reported stronger auto sales than the year-ago period. This upswing is due mostly to "an expansion in fleet sales deferred from last year," the Fed noted.
Seventh District auto sales have apparently spiked remarkably of late and dealers are seeing more shoppers heading into showrooms.
"Dealers noted an increase in showroom traffic as more serious buyers were being lured in by favorable pricing and credit terms," officials shared. "Furthermore, dealers also reported that new incentives from Toyota were helping to offset some of the decline in their sales in February."
Auto sales have been healthier in the Eight District, and one dealer, in particular, reported "stronger-than-expected demand, particularly for light sport utility vehicles," according to the Fed.
In the Ninth District, vehicle sales were up from drastically low 2009 figures. In fact, sales have climbed more than 40 percent for several dealerships in the Minneapolis-St. Paul market, as "strong incentives by automakers helped boost sales."
Also, a representative from a dealers association said sales in North Dakota have been stable.
Vehicle sales in the 10th District were finally stabilized following months of softening. Dealers were "hopeful" that showroom traffic gains would lead to increased sales.
The segments demanded the most by consumers were midsize cars and SUVs.
Gains in consumer confidence pushed up vehicle sales during the last six week in the Dallas region. Dealers reported that vehicle inventories are "lean."
"Prices are flat but rebates recently introduced by Toyota have led other automotive manufacturers to follow suit," the Fed pointed out.
Finally, in the 12th District, there were "somewhat" stronger new-vehicle sales with dealers ramping up promotions. Used-vehicle sales climbed more steeply, but this surge may be limited.
"Sales of used automobiles rose strongly, but contacts noted that limited supply and rising prices may restrain sales going forward," the Fed pointed out.