April Spending on New Models to be Highest Since 2005


This month’s projected new-vehicle sales activity is likely to push lenders’ portfolio total higher — along with elongated terms connected with those contracts.

J.D. Power estimated that consumers will spend $33.5 billion purchasing new vehicles this month, a historic record level for the month of April. The previous April high was $30.5 billion in 2005.

“The April 2014 consumer spending reflects a combination of record average transaction prices — which, at nearly $29,800, surpasses the previous April high of $28,754 in 2013 — and strong retail sales volume,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power.

J.D. Power’s data shows changes in who is buying new vehicles and how they are paying for them.

Buyers 35 years of age and younger are expected to account for 25 percent of new-vehicle retail sales in April, marking a rebound to pre-recession levels.

Additionally, J.D. Power indicated nearly one-third of new vehicles sold in April will be financed with a loan of 72 months or longer, with younger buyers in particular using the longer term loans to manage their monthly payments.

“Among buyers who are 35-years old and younger, 44 percent opt for 72-month or longer loans, while only 25 percent of those who are 55 years and older use an extended loan term,” Humphrey said.

J.D. Power projected that retail light-vehicle sales in April are expected to come in at 1.1 million units, 5 percent higher than in April of last year.

The seasonally adjusted annualized selling rate (SAAR) is expected to be 13.3 million units, more than 700,000 units higher than a year ago, according to J.D. Power.

Meanwhile, Edmunds.com is anticipating a robust new-vehicle sales performance for April.

Edmunds.com predicted that that 1,401,606 new cars and trucks will be sold in the U.S. in April for an estimated SAAR of 16.2 million. The projected sales will be an 8.7 percent decrease from March, but a 9.1 percent increase from April of last year.

The site’s forecast anticipates that the auto industry will enjoy its best April performance since franchised dealers sold 1,444,587 vehicles in April 2006.

“April’s numbers suggest that car shoppers are still motivated to buy new cars, erasing any doubts raised by lackluster sales at the beginning of the year,” Edmunds.com senior analyst Jessica Caldwell said. “The sales performance the last two months is more in line with what we projected for 2014, and there’s every reason to believe that car shoppers will continue to keep this pace.”