August New-Vehicle Sales Rate Could Be Highest in More Than 4 Years

While the expectations may hurt used-vehicle sales, the August new-vehicle sales projection by Kelley Blue Book as well as the forecast developed by J.D. Power and Associates’ Power Information Network and LMC Automotive show franchised dealers are continuing to move new metal at greater rates — possibly the highest clip in more than four years.

The more optimistic forecast comes from KBB, which thinks August new-vehicle sales will hit 1.273 million units overall. Should sales hit that mark, it would represent an 18.7-percent increase from last year.

After adjusting for one additional selling day in August, KBB’s new-vehicle sales projected to improve by a little more conservative level — 14.3 percent.

Although sales remain strong from a year-over-year and seasonally adjusted annual rate perspective, KBB acknowledged the daily selling rate is expected to decline nearly 1,000 units per day compared to July.

Analysts think this drop can be attributed to a seasonal decline in fleet sales taking place during the second half of this year. They added retail sales volume will remain relatively flat month-over-month, outperforming seasonal expectations.

Alec Gutierrez, KBB’s senior market analyst of automotive insights, explained retail demand from consumers has remained steady, despite a sluggish economic recovery.  Although the economy continues to struggle, Gutierrez stressed there were a handful of noteworthy positive developments in August.

He pointed out consumer sentiment improved slightly this month, thanks to a growing belief that the housing market has bottomed, and that confidence bodes well for vehicle sales.

However, Gutierrez acknowledged unemployment remains high at 8.3 percent and will continue to limit sales in the long term.

“Although economic jitters remain top-of-mind for many, those consumers seeking replacement vehicles continue to opt for new cars with used-car values remaining high,” Gutierrez said.

“In fact, a recent survey of shoppers conducted by Kelley Blue Book Market Intelligence found that 53 percent of respondents indicated they were considering a new vehicle rather than used due to elevated used-vehicle values,” he continued.

“Savvy consumers are likely opting to pay an extra $20 or $30 per month to buy or lease a new car than settle for a used vehicle with 20,000 miles or more,” Gutierrez went on to say.

From a segment perspective, Kelley Blue Book expects a jump in sales of compact, subcompact and hybrid models as consumers seek respite from rising fuel prices.

Analysts mentioned gas prices have increased by 30 cents per gallon since early July, and as a result, they have seen an increased interest in fuel-sipping small vehicles both in terms of shopper activity and retail sales volume.

KBB also pointed out midsize car sales also remain strong at 16.8 percent market share.

“The Toyota Camry will continue to lead segment sales; however, the 2013 Nissan Altima could sway consumers with its segment-leading 38 mpg highway,” Gutierrez surmised.

J.D. Power/LMC Automotive August Projection

While not expecting an amount as high as KBB’s estimation, analysts from J.D. Power and LMC Automotive contend the August new-vehicle selling rate is expected to be the highest monthly rate in more than four and one-half years.

The firms revealed August new-vehicle retail sales are projected to come in at 1,066,200 units, which represents a SAAR of 12.3 million units.

Analysts indicated the year-over-year growth rate in retail sales continues a double-digit trend for a fourth consecutive month. They reiterated a belief that retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

“August continues this summer’s trend of healthy growth in retail sales as dealers work to sell down inventory in time to make room for 2013 models,” said John Humphrey, senior vice president of global automotive operations at J.D. Power.

“To date, automakers have been diligent in better balancing production with demand, which has been critical to the improved financial performance for many brands,” Humphrey continued.

“Going forward, this discipline will be tested as demand looks to cool somewhat through the balance of the year,” he went on to say.

While incentives are down slightly in August, compared with July ($106 less per vehicle, on average), J.D. Power and LMC Automotive contend there are deals driving some activity as the model-year sell down takes hold.

“Consumers are pushing aside the economic risks, as the need to replace their current vehicle is matched by availability of both inventory and credit,” analysts stated.

As a result, J.D. Power and LMC Automotive indicated total light-vehicle sales remain stable, with the volume in August expected to come in at 1,285,300 units, a 16-percent increase from last August.

The firms noted fleet represents only 17 percent of total light-vehicle sales, which is lower than the 21 percent year-to-date average.

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