Pent-Up Demand, Affordable Pricing Driving Car Sales, KBB Reports

IRVINE, Calif. — New-vehicle sales are projected to hit 14 million seasonally adjusted annual rate (SAAR) in July 2012, consistent with the 14.3 million average pace maintained through the first half of the year, according to Kelley Blue Book.         

The daily selling rate, according to the vehicle information site, is projected to top 48,300 light-vehicle sales per day, which is better than last month’s 47,500 sales per day and nearly 19 percent above the July 2011 pace. The daily selling rate has remained stable between 46,000 and 51,000 units per day since February, and KBB believes the pace will stay in this range throughout the remainder of 2012 before spiking in December during annual year-end clearance event sales. 

Vehicle sales still are expected to top 14.2 million units overall in 2012, despite slowing in the U.S. economic recovery in recent months. This assumes consumer demand remains strong enough to overcome the worsening economic picture.

“Mid-size cars remain the top-selling segment in July. The redesigned Toyota Camry has been a favorite among consumers since launching earlier this year, and we expect the redesigned 2013 Nissan Altima to add further fuel to the fire this month,” said Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book. “The segment only stands to push industry sales further later this year when the hotly anticipated redesigns of the Honda Accord, Ford Fusion and Chevrolet Malibu arrive at dealerships.”

Although the economy shows signs of weakness, consumer demand remains resilient and continues to drive sales consistently upward. Today’s rebound is driven by pent-up demand from consumers who delayed their purchase during the downturn due to the fallout from the recession, which led many to lose their jobs, homes and savings. These purchase delays along with improvements in vehicle quality over the past 10 years have driven up the age of vehicles on the road today to 11 years on average, according to Polk. 

In addition to pent-up demand, improvements in vehicle supply, new introductions and redesigns, and affordable pricing also have been strong drivers of the ongoing sales recovery. 

Supply conditions also remain favorable for consumers, with a nearly 60-day supply of vehicles available for sale in early July. In terms of incentives, cash rebates are available on trucks and SUVs as well as those models with a 2013 model-year redesign either currently on sale or expected to arrive later this year. Even for models with little to no cash rebate support, low interest rates and lease deals await consumers. 

Affordable transaction prices relative to comparable late-model used vehicles are further driving sales. Values of one- to three-year-old used vehicles remain strong and have led many savvy consumers to purchase a new vehicle rather than pay for an expensive used vehicle. Used-vehicle registrations have declined year-over-year during the past three months, while new-car sales show solid gains. Although both demand and supply conditions remain conducive to new-vehicle sales growth, trouble on the economic front could spell trouble for the recovery down the road.  

For more information and news from Kelley Blue Book’s KBB.com, visit www.kbb.com.