WESTLAKE VILLAGE, Calif.— After weaker sales in May and June, new-vehicle retail sales are expected to bounce back in July as a result of a combination of positive factors, according to J.D. Power and Associates.

Retail Light-Vehicle Sales

July new-vehicle retail sales are expected to come in at 928,000 units, which represents a seasonally adjusted annualized rate (SAAR) of 9.4 million units. July’s selling rate is expected to increase considerably from June’s selling rate of 8.4 million units. While July’s selling rate is also up from 8.9 million units in July 2009, year-over-year comparisons are not as relevant due to distortion from the CARS program in 2009.

“Consumers appear to be responding to the slight increase in visible incentive spending, which is expected this time of year during typical model-year selldown,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “Even if the deals aren’t as strong as they have been in the past, consumers may be grappling with the notion that these deals are as good as they’re going to get. In addition, an increase in maturing leases and a less attractive used-car market may be contributing to higher sales volumes.”

U.S. Retail SAAR from July 2009 to July 2010 (in millions of units)

Total Light-Vehicle Sales

While fleet sales in the month of July are typically low, fleet sales this month are expected to increase from the extremely low levels in July 2009. As a result, total light-vehicle sales for July are expected to return to levels above 1 million units.

“While a return to a higher selling rate in July is a relief after the pronounced instability during the past few months, it’s not yet time to be overly optimistic,” Schuster said.

J.D. Power and Associates U.S. Sales and SAAR Comparisons

¹Figures cited for July 2010 are forecasted based on the first 14 selling days of the month.

²The percentage change is adjusted based on the number of selling days (27 days vs. 26 days one year ago).

Sales Outlook

Despite the strength in retail sales in July, the recovery pattern for the remainder of the year is expected to continue to be volatile. As a result, J.D. Power and Associates has revised its 2010 forecast downward slightly to 9.4 million units for retail sales (from 9.5 million units) and 11.7 million units for total sales (from 11.8 million units).

“Given the inconsistent nature of the current sales environment and the hurdles the recovering economy has yet to face, the rate of the recovery in auto sales is expected to be slower than previously thought,” said Schuster. “This emphasizes the importance of the industry’s new cost structure, as sales are projected to be below the normal range of 15 to 16 million units for at least another two years.”