J.D. Power Expert Profiles U.S. Auto Market Sales Trends

 J.D. Power’s Deirdre Borrego, vice president, U.S. Client Services, spoke to industry participants at the October J.D. Power Automotive Marketing Roundtable in Las Vegas, NV. about the U.S. auto market’s recovery and the fundamentals in the market that are driving strong demand.

Highlights from her talk include analysis from the Power Information Network® (PIN) and J.D. Power’s strategic partner LMC Automotive:

• Retail sales to individual consumers in 2013 are expected to reach 12.8 million units which is back to pre-recession levels.

• The real story isn’t just about sales growth. It’s also about transaction price growth. We’ve seen exceptional performance with prices (consumer facing prices net incentives) increasing by about $3,000.

• The average transaction price has reached $29,200 up from $26,300 in 2008 and $26,600 in 2007.

• The bright spot for the industry is that total consumer expenditure (sales times transaction prices) is projected to reach $376 billion this year. That’s outpacing pre-recession time frames and may be the best since 2005. That’s a $40 billion increase in industry revenue over last year.

 Borrego also described change in demographics; financing opportunities; selection of products—that can be observed in the current market.

• We are seeing tremendous growth in Gen Y buyers coming into market. Gen Y consumers (those born between 1977 and 1994) account for about 23% of retail sales—or just under 3 million units. What factors are driving this growth?

• As Gen Y consumers progress in their careers they are better able to afford new cars. Cars are also more of a requisite purchase as Gen Y begins to build and grow families of their own.

• This age group was significantly impacted by the downturn and tightening credit restrictions. Improving credit markets have enabled these consumers to return to the market in larger proportions.

How about the Financial Equation?

• Loan terms have risen. Nearly one in three retail sales are facilitated by a loan carrying a term of 72 months or longer.

• Leased units as a percent of total industry sales have also grown. The shorter term of the typical lease (about 36 months) helps to counter the risk of purchase cycle extension presented by growth in extended-term financing.

• Sub-prime consumers, those carrying a credit score below 650, account for roughly 16% of sales so far this year. This population is on track to deliver 300,000 incremental unit sales to the industry in 2013. While sub-prime mix is increasing, current levels are about 500,000 units below 2007 levels when roughly one in five purchases met this criterion.

 

Bookmark and Share

Leave a Reply

 

 

 

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>