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NADA: New-Vehicle Sales Remain Strong, Older Units Drive Used Market

December 14, 2010

McCLEAN, Va. — A strong November has kept U.S. new-vehicle sales on pace to finish at 12 million units for 2010, and the National Automobile Dealers Association (NADA) says that figure could grow by another million units next year. On the used side, vehicles from model year 2005 and older are making gains in a still-competitive wholesale market.

NADA’s latest report cites a range of indicators that paint a rosy picture for new-vehicle sales in 2011. On the manufacturing side, the report singled out Audi and Kia as well as the Chevrolet Equinox, Hyundai Sonata and Honda Odyssey as makes and models that have enjoyed a surge in popularity — so much so, in fact, that each manufacturer is ramping up production to meet the demand.

As a result, factory incentives will undoubtedly see a surge in December and January. Bandon, Ore.-based CNW Research recently reported that incentive spending was on the rise in October; however, not yet up to par with historical trends and about 15 percent lower on a year-over-year basis. The same could be said for The Conference Board’s U.S. Consumer Confidence Index, which made news earlier this month with a November spike driven by heavy holiday-season discounts across the retail segment.

All this is in spite of a nationwide unemployment rate that continues to hover around the 10 percent mark. Any positive change in that number would almost certainly result in a payoff for auto dealers, especially considering CNW’s Pent-Up Demand indicator shows that 46 percent of new-car buyers are “new-to-market” — a steep increase from the mere 17 percent of shoppers who initiated their purchase in the first quarter of 2010.

The strong demand for and short supply of quality used vehicles — broadly defined as units less than five years old, many still under factory warranty — is no longer news for new-car dealers. In recent years, most have been slower to send trade-ins to auction or, in the case of many disenfranchised former General Motors and Chrysler dealers, converted their properties into used-car lots. 

Now, used units older than five years are beginning to see their values rise. The NADA reports that prices on model year 2004 and lower vehicles are outpacing increases on newer used units. The older units are up 14 percent on a year-over-year basis, compared to 5 percent for model year 2005 to 2009. Those figures are driven by the SUV and pickup segments, which enjoyed price hikes of 24 and 19 percent, respectively.

The NADA report cites the increasing availability of vehicle history reports such as those provided by Carfax and AutoCheck as one reason consumers may feel more comfortable investing in an older car. The bulk of the credit, however, must go to the economic downturn, which forced many used-car buyers out of the price range of newer used units.

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