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Credit Availability Keeping July Sales on Pace, Report Says

July 26, 2012

WESTLAKE VILLAGE, Calif. — July’s new-vehicle retail sales are expected to post the second strongest year-over-year growth rates during the past 12 months, according to a monthly sales forecast developed by J.D. Power and Associates’ Power Information Network (PIN) and LMC Automotive.

New-vehicle sales are projected to come in at 969,200 units, which represents a seasonally adjusted annualized rate (SAAR) of 11.5 million units. The selling rate is a decline from June, but is on pace with the expected level for 2012.

“Retail sales got off to a fast start in July, and while they’ve slowed down a bit as the month has progressed — through the first 16 selling days — they’re still up 15.1 percent compared to July 2011,” said John Humphrey, senior vice president of global automotive operations at J.D. Power and Associates. “The positive growth has continued to build, as July is looking strong across most vehicle segments, as well as for many of the major manufacturers.”

All major segments are expected to show year-over-year sales gains in July, with the exception of the midsize CUV segment. The sub-compact conventional, midsize conventional and compact conventional segments are projected to show year-over-year increases of 28 percent or more.

U.S. Retail SAAR—July 2011 to July 2012

(in millions of units)

 

U.S. Retail Light-Vehicle Sales from July '11 to July '12
U.S. Retail Light-Vehicle Sales from July '11 to July '12
 

The report also revealed continued loosening of credit guidelines, with PIN data showing that new-vehicle loans of 72 months or greater account for 30 percent of retail sales in July 2012 — up from 26.7 percent in July 211.

“Long-term financing is a key driver in sales growth,” said Humphrey. “Loan terms and credit availability are bringing consumers back into the market who have been shut out since the recession began in 2008.”   

Total light-vehicle sales remain stable, with the volume in July expected to come in at 1.17 million units, a 20 percent increase from July 2011. July is typically a low fleet month, the report noted, averaging 15 percent of total light-vehicle sales during the past five years. July 2012 remains low at 17 percent, but stronger than the historical average.

 

J.D. Power and LMC Automotive U.S. Sales and SAAR Comparisons

 

July 20121

June 2012

July 2011

New-Vehicle Retail Sales

969,200 units

(18% higher than July 2011)2

1,021,635 units

892,195 units

Total Vehicle Sales

1,168,000 units

(20% higher than July 2011)

1,282,981 units

1,057,172 units

Retail SAAR

11.5 million units

12.2 million units

 9.5 million units

Total SAAR

14.1 million units

14.1 million units

12.2 million units

1Figures cited for July 2012 are forecasted based on the first 16 selling days of the month.

2The percentage change is adjusted based on the number of selling days in the month (24 days in July 2012 vs. 26 days in 2011).

Risk of further economic slowdown continues to mount as the U.S. labor market weakens. However, construction is gaining traction, which is typically a leading indicator of recovery, the report stated. Given the conflicting variables and a sustained level of pent-up demand, LMC Automotive is maintaining its 2012 forecast for light-vehicle sales at 14.5 million units, with retail sales at 11.6 million units.

“The automotive industry is closely watching the sales performance over the next two months as the industry wrestles with a mixed bag of economic signals,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "Given the economic slowdown and the increasing likelihood that we see a second half boost in auto sales there is approximately 150,000 units of risk to the 2012 forecast."

 

 

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