Despite a rise in gas prices, data from the first 15 days of February indicates that vehicle sales could rise 7 percent to 1.1 million units this month, according to CNW Research.
New-car floor traffic was up nearly 13 percent for the first half of February, with the closing ratio standing at 39.7 percent – a half percent better than last year but down from 41.6 percent in January.
Same-store sales were up 11.6 percent during the period.
The Bandon, Ore.-based research firms also reported that its Jitters Index fell 0.6 percent vs. January, as worries about fuel prices jumped from 7.8 (on a 10-point scale) last month to 8.1 this month. “The concern here is that the data suggests consumers are finding $4.50 per gallon gasoline a breaking point for family budgets,” wrote CNW’s Art Spinella in his firm’s February newsletter. “More than 80 percent of general consumers say they would postpone any new-vehicle acquisition if gas hits that figure.”
And with gas prices at the highest level ever for this time of year, Spinella continued, many analysts believe gas could reach $5 per gallon by mid-summer. “The impact on car sales could be dramatic,” wrote Spinella.
According to the research firm, if gas prices hit $4.50 per gallon, 87 percent of new-car intenders polled by CNW would purchase a more fuel efficient car “immediately,” up from 84.6 percent a year ago. Hybrid consideration also leaped from 87 percent to 93 percent.
“To show just how the world has changed, in April 2006, with gas prices at $2.75 per gallon, about 45 percent of new-car intenders said they’d consider a hybrid if gas reached $3.75,” Spinella noted.
CNW also reported that the share of new-car trade-ins with negative equity has dropped slightly from peak levels last year, but the amount of negative equity is on the rise so far this year.
Last year, the share of trade-ins with negative equity came in at 16.6 percent in 2010 – the highest level since 1990 when CNW began tracking the stat line. For 2011, that figure dropped to 14.5 percent, but the amount of negative equity rose to $5,867 from the previous year’s $5,127.
As for used-car pricing, CNW reported that pricing has taken a dramatic turn for the better. For franchised dealers, transaction prices are up nearly 11 percent. For independent dealers, transaction prices are only slightly higher than a year ago at 1.04 percent. Both segments were up vs. January.
When added to new-car sales, total vehicle acquisition in February should hit 3.05 million, a gain of 9.1 percent compared to the same month a year ago.
“The early February data shows pent up demand down to about 109,500 units or 77 percent of the level seen a year ago,” he added. “The good news: More consumers who previously were holding back are coming into the market. In fact, they’ve slashed their average delay in purchasing a new vehicle by 29 percent to 3.98 months from last year’s 5.4 months. Historically, the figure has been around 2.8 to 3.1 months.”
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