Tag Archive | "SAAR"

Edmunds: Stage Set for Market Contraction


SANTA MONICA, Calif. — A week after saying a strong economy is likely masking market factors bubbling just below the service that could start to slow down sales, Edmunds reported on Tuesday that auto loan interest rates in June likely reached their highest level since 2009.

The annual percentage rate on new financed vehicle averaged 5.82% in June, up from 4.96% in June 2017 and 4.10 in June 2013. The firm’s analysts point to the most recent rate hike by the Federal Reserve as a contributing factor, noting that June marks a 17% total increase since January 2018, when APRs averaged just below 5%.

“Auto loan interest rates have been steadily on the rise this year and we don’t see them going down anytime soon, which could mean trouble for automaker sales through the end of the year,” said Jeremy Acevedo, Edmunds’ manager of industry analysis. “While some shoppers may take this as a cue to purchase new vehicles now while rates are still somewhat favorable, we’re getting dangerously close to a tipping point. Shoppers with average or subprime credit may end up putting off purchases as financing vehicles get increasingly more expensive.”

The firm noted that zero percent interest loans reached their lowest level in nine years in June, accounting for just 5.6% of total finance deals, compared to 9.47% in June 2017 and 10.55% in June 2013.

Edmunds revealed another problem in its midyear automotive trend report, which was released last week. It noted that the number of buyers who owe more than their vehicle is worth remains high, with 14.1% of buyers owing more than their car was worth. That’s down from 14.2% in 2017 and 14.6% in 2015 — the latter being a 14-year high.

“June typically boasts a substantial amount of zero percent financing offers, so this is a big red flag,” added Acevedo. “This might be a sign that access to cheap and easy credit — a post-recession hallmark that we’ve all grown so accustomed to — could be officially over. But there’s hope yet — the true indicator will be whether zero percent deals materialize through the rest of the summer selling season, which automakers typically rely on to clear outgoing model-year inventory.”

Edmunds put June sales at 1.52 million new cars and trucks and the month’s seasonally adjusted annual rate at 17.1 million, reflecting a 4.1% decline in sales from May but a 3.4% increase from June 2017. Through May, 2018 sales were up 1.1% compared to the same period in 2017. However, the firm noted that the month-to-month fluctuations are enough to give the industry pause.

As for retail sales, Edmunds put June’s retail SAAR at 13.9 million units, with fleet transactions accounting for 18.4% of total sales. Additionally, 3.2 million used vehicles were expected to be sold in June, for a SAAR of 39.2 million. That down from 3.3 million used sales in May, which had a SAAR of 39.3 million.

The firm also noted that millennial new-vehicle purchases hit a record high through May, with 21% of millennial car purchase being new.

“The strength of the economy is creating a very thick force field for automakers now, but once that starts to weaken, there are a lot of market factors bubbling just below the surface that could really start to slow down sales,” said Jeremy Acevedo, manager of industry analysis at Edmunds. “Even though millennials are finally starting to buy new vehicles, the U.S. market is virtually saturated. Add to that record-high vehicle prices, rising interest rates and historically high numbers of people who owe more than their cars are worth, and the stage is set for a market contraction.”

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NADA: 17.4 Million Units Possible for 2017


LOS ANGELES — Noting that the economic outlook is a little less certain than a week ago, the National Automobile Dealers Association’s Steven Szakaly called for a 17.1 million-unit year in 2017. But the NADA’s chief economist said he’ll have a better read by the end of February, beginning of March.

By that time, Szakaly added, the industry could be on pace to sell more than 17.1 million new vehicles. The key will be whether President-elect Donald Trump sticks to his promises of tax reform, increased infrastructure spending, and reducing the regulatory burden in the banking, automotive, and energy sectors.

“These will all be net benefits. The question, of course, is, will these net benefits be outweighed by possible net negatives, which are, of course, the outlook on immigration and the outlook on free trade,” said Szakaly today at an economic briefing ahead of the Los Angeles Auto Show. “At this point, it’s really difficult to determine which set of factors are going to win out.”

As for 2016, Szakaly said new-vehicle sales are on pace for a 17.4 million-unit year with seven weeks remaining. That would be 200,000 units less than 2015’s all-time sales record of 17.5 million units.

The chief economist described the market as stable but not growing, noting that pent-up demand is “effectively spent.” What’s sustaining auto sales momentum is that the overall economic outlook for 2017 remains strong, with projected gross domestic product growth at 2.6%, employment growth between 150,000 to 180,000 per month, and the price for regular-grade gasoline at less than $2 per gallon.

The easing of fuel economy regulations would benefit the economy even more, he added. Rising wages, which have been stagnant in many sectors, would also help. Szakaly said wages have been rising steadily for college-educated workers.

The chief economist listed rising interest rates as a concern, but said that even a 2% increase would add only $30 dollars to a monthly car payment. Currently, he noted, average interest rates are running at 4.8%, with monthly payments averaging between $485 and $500.

“That’s really not much when we think about what most of these vehicles are running and costing,” he said if rates were to rise by 200 basis points. “I think consumers will be able to pay that as we look at least out into 2017. I think what we’re looking at a 50 basis-point rise by the end of 2017.”

Szakaly also listed ever-increasing loan terms and higher vehicle transaction prices as concerns. As for the latter, Szakaly believes higher transaction prices will likely be offset by manufacturer incentives, which he described as “stable at a very high level.”

Incentives, he noted, have reached $3,900, on average, per unit, representing 10.8% of MSRP. The only time the industry has seen incentives that high was in 2008. The problem is high incentives tend to push down used-vehicle prices, which could push down trade-in equity for car buyers.

Szakaly said he also expects new-vehicle dealership to retail 15.3 million used vehicles in 2017, compared to an expected 15.1 million used sales in 2016. The total used-vehicle market will exceed 40 million retail sales in 2017, he added.

“I tend to favor the idea that we will see some significant reforms on the tax side. We will see some fairly large spending in terms of infrastructure, and I think we will see a reduction in the regulatory burden far sooner than we will see the negative consequences in immigration crackdown … reductions in free trade,” Szakaly said of the new administration. “Overall, I believe the second half of 2017 could very well surprise both for gross domestic product growth and for motor vehicles. If all of these policies come to fruition, we could see a year in the 17.3 or 17.4 million [range].”

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New-Vehicle SAAR Falls Below 17 Million in August, Manheim Reports


ATLANTA — The seasonally adjusted annual rate (SAAR) for new vehicles fell below 17 million for the second time this year in August, according to Manheim. The firm, however, said the drop should not be cause for concern, noting that it “may be a good think.”

A lower SAAR, the company stated, points to manufacturers not overly pushing the market. Although incentives in August were up compared to a year ago, they were flat sequentially. This was caused by a lot of stair-step money not being dispersed during the month due to dealers not reaching their quotas.

Preliminary numbers also show that a reduction in lease incentives might have caused a year-over-year decline in lease penetration rates in August, according to the company.

While leasing and new-vehicle sales stumbled this month, used-car sales are thriving.

“In the first seven months of 2016, used unit sales by both franchised and independent dealers increased at the fastest pace of this recovery, and more than twice as fast as last year. While new retail unit sales have declined this year, used unit sales are up. That’s normal for this point in the automotive cycle, and we expect it will continue into 2017,” read Manheim’s Used Vehicle Value Index report for August.

Certified pre-owned sales rose 6% in August compared to a year ago and 4% year to date, according to Manheim. The company said it expects full-year sales to reach a record 2.7 million.

Wholesale used-vehicle prices declined slightly in August, according to Manheim. However, the recorded Manheim Used Vehicle Value reading for the month was still 2.1% higher than the same time last year at 126.9.

According to Manheim, wholesale pricing this year has been supported by a retail market that has experienced higher volumes, stabilizing margins and respectable turn rates. But primarily, Manheim stated, wholesale pricing has been supported by the improved efficiencies in dealers’ used-vehicle operations.

A couple issues that played a part in last month’s decline in used-vehicle pricing, according to Manheim, were a lack of growth in hourly earnings and a cut to the average work week during the month. In terms of aggregate demand, Manheim added, the combination of these factors equated to a loss of 300,000 jobs during August.

For the second consecutive month, the number of people employed part time for economic reasons grew in August, the company stated.

“How did the financial markets react to this? With glee. They took it as a sign that rates would not be hiked at the September meeting, even though the normalization of monetary policy is long overdue. Federal-funds futures put the odds of a rate hike this month at only 32%, and only 60% by December,” Manheim noted in its report.

However, this mindset is misguided, according to Manheim. The company said it expects employment growth to slow over the next year and, and in order for the market to thrive, employment needs to grow. But low interest rates will not help employment growth, the firm added.

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NADA Maintains 17.7 Million Sales Forecast for 2016


MCLEAN, Va. — The National Automobile Dealers Association (NADA) is sticking to its initial forecast of 17.7 million news cars and light trucks for 2016, despite current economic and political uncertainties.

“We’ve had six straight years of steadily rising sales, which has been a fantastic period of growth, and vehicles per household have returned to the same level prior to the Great Recession,” said NADA Chief Economist Steven Szakaly at the Center for Automotive Research Management Briefing Seminars in Traverse City, Mich., on Tuesday. “But most pent up demand has been satisfied. For 2017, we expect new-vehicle sales to reach 17.1 million units.”

Szakaly listed the rising employment rate, leases, and cheap gas and diesel prices as reasons why sales will remain strong throughout 2016.

“For 2016, light trucks will account for about 59% of the new-vehicle sales market and cars will account for 41%,” he said. “Leases are increasing, which now accounts for more than 34% of the market.”

He added that although interest rates on auto loans are expected to increase by about 0.50%, consumers shouldn’t notice the change due to automakers rolling out incentives to counteract the higher rate.

While slightly higher interest rates won’t do much to curtail new-vehicle sales, Szakaly did have some ideas of what could. “The aging vehicle fleet discourages long-term vehicle sales; average loans terms for new vehicles have risen to 68 months; and new-vehicle transaction prices are continuing to rise, up about 3% this year, while wages remain stagnant.”

Millennials, he concluded, will be the greatest growth factor for new-vehicle sales in the foreseeable future. “Until millennials come of age with higher wages, get married and have children, the auto industry will experience stagnant growth periods.”

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KBB Predicts Record Sales in April


IRVINE, Calif. — Kelley Blue Book said this week it expects new-vehicle sales to grow by 4% compared to the same-year period in 2015. The expected growth should deliver record new-vehicle sales of 1.51 million and a SAAR of 17.5 million.

Retail sales, the firm said, are expected to account for 80.3% of volume this month, down from 80.9% in April 2015.

“Following a disappointing March, we expect sales to get back on track in April with the SAAR in the mid-17 million range,” said Tim Fleming, analyst for Kelley Blue Book.  “Increased fleet sales and rising incentive spending among automakers remain the factors to watch, but retail demand appears to be holding steady, signaling the industry’s strong run isn’t over quite yet.”

Compact SUVs/crossovers, mid-size cars, full-size trucks and mid-size SUVs / crossovers should also realize volume growth this month, according to KBB. Compact cars, however, are expected to be lone segment to show a decrease in volume compared to the same time last year.

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April Vehicle Sales Paced at 16.5 Million-Unit SAAR


WOODCLIFF LAKE, N.J. — Total new-vehicle sales in April increased 0.6% compared with a year ago to 1.45 million units, according to Autodata Corp. April’s seasonally adjusted annual rate was 16.5 million units – down from last month’s SAAR of 17.15 million. The following is a breakdown of sales performance by manufacturer:

BMW: BMW Group sold 32,428 units in the U.S. market in April, the company reported, a 9.6% increase from a year ago. Sales of BMW brand vehicles increased 6.9% from a year ago to 26,952, while MINI brand sales increased 24.7% from a year ago to 5,476.

BMW’s passenger car segment led the way 19,014 units sold vs. 16,923 units sold in in April 2014. Sales of the BMW 3 and 4 Series, combined, increased 5.9% from a year ago to 10,374 units sold, while sales of the 2 Series increased 38.8% to 1,009 vehicles.

BMW truck sales fell 4.1% from a year ago to 7,938 units sold.

Chrysler: April sales for Fiat Chrysler Automobiles increased 6% from a year ago to 189,027 units sold — the OEM’s best April since 2007. The group also extended its streak of year-over-year sales gains to 61-consecutive months.

Sales for Chrysler brand increased 26% from a year ago to 27,704 units sold. Leading the way was the Chrysler 200 with a 348% sales increase from a year ago. Jeep sales were up 20%, representing the brand’s best monthly sales ever and its 19th consecutive month of year-over-year sales gains.

Ram Truck brand sales were up 4%. Leading the way was the Ram pickup truck with 37,921 units sold. Sales of the ProMaster Van were up 43%, while Cargo van sales decreased by 86% from a year ago. Dodge sales were down 16%, with the Avenger and Caravan posting the largest year-over-year decreases.

Ford: April sales increased 5% from a year ago to 222,498 units sold — the vehicle OEM’s best April since 2006. Retail sales grew 7%, while fleet sales were up 1%. Sales of Ford’s SUVs were in high demand, with sales reaching an all-time April sales record of 62,730 vehicles sold.

The new Ford Edge was up 78% over last April, while sales of the Escape were up 5% from a year ago. Ford’s F-Series brand posted a gain of 8%. The Lariat, King Ranch and Platinum premium models made up 60% of F-Series sales.

Lincoln Sales increased 25% in April vs. a year ago, the brand’s best April results since 2008. The Navigator SUV posted the largest sales gain with a 36% increase from a year ago.

General Motors: Retail sales at GM increased 5.9% from a year ago to 269,056 units sold. Light trucks made up the bulk of monthly sales, with sales increasing 17.7% to 181,209 units sold. Total car sales decreased by 12.2% to 87,847 units.

GM’s crossover sales were strong, with the Chevrolet Equinox posting a 42% sales increase from a year ago. The Traverse realized a 28% increase from a year ago.
Chevrolet sales increased 7% from a year ago to 128,805 units sold, while GMC sales rose 8.1% from a year ago to 37,657 units. Cadillac sales were up 1.1%, with sales totaling 13,427 units. Only the Buick brand showed a sales decrease in April, with sales falling 10.4% from a year ago to 14,418 units sold.

Honda: American Honda sales posted a 1.8% sales increase in April, with sales totaling 130,068 units. Honda division sales decreased 2.7% to 115,194 units sold, while Acura sales increased 5.3% from a year ago to 14,874 units sold.

Honda truck sales increased 2% from a year ago to a April record of 52,635 units sold. CR-V sales also set an April record, with sales increasing 3.4% from a year ago to 29,452 units sold. The outgoing 2015 Pilot posted a 28% sales increase, with sales totaling 11,222 vehicles.

Acura’s TLX was a high mark for the brand in April, with 4,093 units sold. The MDX was the sales leader with 4,970 units sold, a 4.1% decrease from a year ago.

Hyundai: Hyundai Motor America posted its best April ever, with sales increasing 3% from a year ago to 68,009 units sold. The Elantra was the monthly sales leader with 21,911.

On a percentage basis, the Genesis sedan had the best month with a 142% increase over last year, followed by the Azera with a 30% sales increase from a year ago.
Mazda: Mazda reported its best April sales in 20 years, with sales increasing 7.5% from a year ago to 24,123 units sold.

Mazda6 sales were up 30.9% from a year ago, with sales totaling 4,995 units — the model’s best April since 2006. The CX-5 was the sales leader for the month, with sales totaling 8,960 units.

Mercedes-Benz:
Sales of Mercedes-Benz vehicles, including Mercedez-Benz, Maybach and SMART, increased 10.6% from a year ago to 32,429 units sold. The Mercedes-Benz brand alone posted a 12.8% year-over-year increase, with sales totaling 29,188 units.

The C-Class was the top seller for the brand with 6,665 vehicles sold, a 30.3% increase from a year ago. The M-Class was the bestselling truck, with sales increasing 29.1% from a year ago to 4,945 units sold. Sprinter van sales increased 15.5% from a year ago to 2,764 vehicles sold for the month.

Mitsubishi:
The vehicle OEM posted a 25.6% sales increase from a year ago — the company’s 14th consecutive year-over-year sales increase — with sales totaling 8,216 units. The Outlander Sport crossover SUV was the brand’s bestselling model, with 2,674 units sold. Mirage sales totaled 2,407 units.

Nissan: The Nissan Group set an April sales record with 109,848 units sold in April, a 5.7% increase from a year ago. Both the Nissan and Infiniti divisions posted positive increases for the month.

Overall sales of trucks, SUVs and crossovers were up 23.7% from a year ago, with the Nissan Rogue setting an April sales record of 21,767 units. Sales of the Murano crossover increased 72.9% to 4,121 units sold. The Altima was the overall sales leader in terms of units, with 22,108 units sold. That total, however, was down 11.6% from a year ago.

The Infiniti QX60 was the luxury division’s sales leader, with 2,829 units sold —a 24% increase over last year.

Toyota: Toyota sales rose 1.8% to 203,329 units sold in April. The Toyota division posted an increase of 0.5%, with sales totaling 177,453 units. Lexus division sales rose 11.7% from a year ago to 25,876 units.

The Camry was the sales leader for Toyota with 34,066 units sold. That April sales total, however, was down 10.4% from a year ago. The RAV4 was up almost 22%, with sales totaling 22,914 units.

Sales of Lexus SUVs were up 23.5% from a year ago, with the RX leading the way despite posting a 16.2% sales decrease from a year ago.

Volkswagen: Volkswagen group sales increased 1% from a year ago to 27,175 units sold in April, with the Audi and Bently divisions both posting positive gains. The Volkswagen division sales fell 2.7% from a year ago to 30,009 units sold.

Golf sales were up 206%, with sales totaling 5,508 units – the model’s best April since 2000. The new Golf GTI alone posted a 97% increase, with 1,905 units sold, while the Jetta Sedan led all vehicles with 11,440 units sold — 5.4% sales increase from a year ago.

Audi sales were led by the Q5 SUV, which posted a 14.2% sales increase (sales totaled 2,762 units), and the A3 sedan (sales totaled 3,187 units).

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