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CNW: Industry Has Reached ‘Razor-Thin Balance'

January 08, 2015

BANDON, Ore. — CNW Research used an interesting analogy to describe its expectations for 2015 sales, a year in which it believes factors like fuel prices could tip sales either way.

“It’s called ‘hard pan,’ and in some parts of the country, it is just below the surface. Dry, it feels like rock, but when you add rain, it becomes mushy and as slick as snot,” wrote CNW’s Art Spinella in the research firm’s monthly newsletter.

“The 2015 auto industry is being built on hard pan, according to our annual Purchase Path study,” he continued. “Everything is resting on hard pan that even the slightest economic rain could easily upset.”

A key factor will be the willingness of consumers to make big-ticket purchases like automobiles, with Spinella predicting a significant decline in home-centric jitters, “laying the foundation for a solid sales year.”

The firm said a new 13% increase in floor traffic is likely for the full calendar year, as a growing percentage of consumers become key market participants, which the firm defined as shoppers who are financially capable, are fully able from a credit/work standpoint, and are at least somewhat willing to make a new-vehicle acquisition.

CNW also expects closing ratios to jump to 9.65% from calendar year 2014, laying the groundwork for a 17.1 million unit year. “A more stable sales force at dealerships, heavier incentives at the dealership and a rebound in used-car prices will all aide in that increase,” Spinella added.

Also during 2014, consumers paid about $2,800 more for certified pre-owned models than comparably aged non-certified pre-owned used cars. CNW predicts that premium will rise in 2015, hitting approximately $3,100 for the full year. The firm also believes subprime approvals will see a 12.75% increase in 2015, driven in part by automakers’ captive finance companies looking to expand sales.

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