Sales Projections by TrueCar & Edmunds Bode Well for Used Industry

With much of their attention dedicated to new-vehicle sales projections, TrueCar.com gave a glimpse as to where February’s used-vehicle sale total might land when it released estimations at the same time as Edmunds.com.

TrueCar estimated this month’s used sales figure to land at 2,099,298 units, a sum that would be 16.5 percent higher than February of last year but 3.1 percent lower than January.

Analysts figured the ratio of new to used sales to be 1:2 for February.

TrueCar arrived at that ratio through a new-vehicle sales projection for February of 1,088,321 units, a figure that includes fleet transactions. That total would represent a 9.6-percent jump from last February and 19.2-percent gain from January on an unadjusted basis.

The site indicated its February forecast translates into a seasonally adjusted annualized rate (SAAR) of 14.3 million new-vehicle sales, up from 13.3 million last February and from 14.2 million in January.

TrueCar added that retail sales are up 5.6 percent, compared to last February, and up 13.4 percent from January.

“The signs for 2012 point to a great period of recovery for automakers as the industry looks at continued growth through the year,” surmised Jesse Toprak, vice president of industry trends and insights for TrueCar.com.

“We are upgrading our 2012 forecast to 14.0 million units based on improving consumer demand, better credit availability and dozens of compelling new products due to arrive at the dealerships this year,” Toprak continued.

“The correlation between the stock market and new-vehicle sales proved to be extremely strong once again with both the Dow Jones Industrial Average and new vehicle SAAR reaching their highest levels since May 2008 in February,” he went on to say.

Edmunds.com’s Sales Projections

Edmunds.com elected to project only new-vehicle sales, but its estimated overall total landed a bit higher than TrueCar.

Site analysts placed its projected February new-vehicle sales total at 1,095,059 units, a figure that would leave SAAR at 14.4 million units. Edmunds.com’s estimate marked a 19.9-percent increase over January and a 5.9-percent uptick over February of last year.

“There’s a rising tide of excellent buying conditions right now that is really driving auto sales momentum,” explained Edmunds.com senior analyst Jessica Caldwell.

“Between surprisingly strong sales over President’s Day weekend, optimistic economic news and unseasonably mild weather conditions across the country, things seem to be breaking the right way for both car buyers and dealers,” Caldwell continued.

Edmunds.com also continued to find evidence that the release of pent-up demand is having a direct impact on the auto sales recovery.

With the exception of the Cash for Clunkers period in 2009, analysts found the average age of trade-in vehicles in January and February (6.1 and 6.2 years old, respectively) is the oldest on record, suggesting that consumers who were holding out through the recession are finally finding reasons to return to the automotive market.

However, Edmunds.com vice chairman Jeremy Anwyl took a cautious approach.

“With February vehicle sales pushing solidly past 14 million units on a seasonally adjusted basis, evidence is building that the sales recovery is entering a new, more robust phase. The case is not airtight though,” Anwyl stressed.

“Sales results are still being boosted by returning buyers who had waited for the supply of Japanese-sourced vehicles to rebound following last year’s earthquake. And with one of the more mild winters on record — at least across much of the country — the assumptions in the SAAR formula could be knocked out of whack, making January and February something of a layup,” he continued.

“Whether these factors are behind the nice SAAR numbers so far this year — or if we can count on a more fundamental return to market by recession weary consumers — will be made clear in March. March is when unit sales typically jump up, meaning that a good SAAR number is a much tougher hurdle. A March SAAR of over 14 million total sales would be a very good sign,” Anwyl went on to say.

To back up his analysis, Anwyl suggested some online reading: one article published by The Economist and another item from The New York Times.

“Both articles are worth a read,” he stressed. “They serve as reminders that, while sales are sure to improve in the short term, the recovery is but a normal part of the business cycle. Underneath this cycle, there are longer-term trends playing out as well. The implications of these trends for auto sales, and for the economy as a whole, are not pretty.

“Something to think about as the sales forecasts for this year get ratcheted up,” Anwyl concluded.