Webb: Used Sales Increase Likely, Floor Plan Challenges Remain
ATLANTA — When asked in the Manheim Consulting's January Auto Industry Brief whether he expects used-vehicle sales will climb this year, chief economist Tom Webb said he "definitely" sees an upswing ahead.
"Used-vehicle retail sales are inherently stable and are supported by the 250 million vehicles in operation and the 118 million households that own them," he explained.
"That means, on any given day, there are literally tens of thousands of households that would like to trade up to something a little better, if they can do so for an affordable payment," Webb continued.
Over last two-plus years, the amount of shoppers with the ability to "trade up" was dampened by tight credit and a soft job market, he noted.
"But, in 2010, the availability of retail financing will improve, and we foresee job gains rather than job cuts," Webb pointed out.
Despite the optimism on the used-car sales front, there may still be financing issues for dealers, as 2010 may see independent dealers still struggling to obtain floor plan and capital loans, according to Webb, who acknowledged that the banking world still shows signs of stress.
"Floor plan lines, and other commercial loans to small and midsize businesses, will remain very much a problem in 2010. Stress persists in the banking industry," he noted.
In fact, Webb said the U.S. saw 140 bank failures last year.
"Many of the remaining small and midsize banks, which are important suppliers of credit lines and capital loans to independent dealers, will need to restrain loan growth in 2010 in order to offset additional write-downs in commercial real estate," he added.
Continuing on to new-vehicle market, Webb discussed some data regarding fleet sales. He noted that, based on the data Manheim was using, total new-vehicle sales pushed into the rental industry during 2009 were 1.1 million, a 24.5 percent dip.
"That's off from a peak of 2.1 million new vehicles sold into rental in both 2005 and 2006. If you add in the 588,000 vehicles sold to commercial and government fleets, you get total fleet purchases of 1.72 million in 2009, a decline of 27.5 percent from 2008," Webb pointed out.