J.D. Power Expert Outlines Key Forces behind U.S. Sales Growth

Deirdre Borrego presents auto industry outlook at J.D. Power Automotive Marketing Roundtable “The U.S. auto industry has enjoyed remarkable revenue growth this year,” Deirdre Borrego, J.D. Power vice president of client services, said during a presentation at the October J.D. Power Automotive Marketing Roundtable (AMR) in Las Vegas, NV. “From a consumer standpoint,” she said, “there are specific market forces that have kept sales strong and transaction prices high.” Borrego pointed to four key drivers:

• Long-term loans are a key enabler. Nearly one in three 2013 sales to date was facilitated by a loan of 72 months or longer. Extended terms, combined with. . .

• . . . Low interest rates have allowed consumers to buy a richer mix of vehicles while keeping their monthly payment within their household budget.

• Strong residuals enable manufacturers to offer attractive leases to consumers, again with desirable monthly payments.

• Tight used-vehicle supply is another key factor. The average price of a used vehicle increased by roughly $3,000 since 2008 to reach $18,800 so far this year. This drives stronger in-equity positions for existing owners, improving purchasing power or removing barriers to entry. Continue reading ›

J.D. Power’s King Discusses U.S. Auto Market Shifts at Joint Conference

Thomas King Speaking at S&P ConferenceJ.D. Power’s Thomas King, senior director, Power Information Network® (PIN), recently shared insights on changes in new-vehicle demand in the U.S. market at the Standard & Poor’s/J.D. Power Auto Industry Hot Topics Conference in New York.

Analysts from S&P, J.D. Power, and strategic partner LMC Automotive, presented their views and analysis of the current and future state of the U.S. and global auto industry to an audience of more than 160 Wall Street analysts and reporters. Continue reading ›

J.D. Power’s O’Neill Sees Industry Revival with Rosier Sales in the U.S. Market

AutoForum- Fin O'Neill 1New-vehicle sales in the U.S. market have already recovered by more than 10% annually since 2010, Finbarr O’Neill, president of J.D. Power and Associates, said in remarks this week at the company’s 2013 Automotive Forum. The conference was sponsored with the National Automobile Dealers Association (NADA) at the Grand Hyatt Hotel in New York City before the New York International Auto Show* press briefings this week.

Total U.S. sales of cars and light trucks this year should surpass 15.3 million units, which is up from 14.4 million unit sales in 2012, O’Neill confirmed. He also said that new-vehicle sales are projected to surpass 16.4 million units by 2015.

O’Neill also told industry participants at the conference that retail light-vehicle sales are solid and increasing while the daily rental market and fleet sales are well under control, which is very different from the mid-2000 period, when manufacturers relied too heavily on discounts and fleets. At the same time, he said that J.D. Power’s data finds that the average transaction price of a new vehicle has increased by $3,500 since that period. Credit is looser, and leasing has risen to 23% of the sales mix, based on data collected by J.D. Power’s Power Information Network® (PIN). Continue reading ›

February U.S. Auto Sales Remain Strong with Robust 13.1 Million-Unit Pace

2012 WAC Humphrey-27-MNew-vehicle sales are expected to remain resilient through the rest of February even though the retail selling rate is weaker than it was in January of this year, according to the monthly sales forecast update from our Power Information Network® (PIN) and LMC Automotive. The forecast is based on analysis of transaction data during the first 14 selling days of the month.

Retail light-vehicle sales this month are projected to reach 931,100 units, which would be 9% higher than in February 2012 and would translate to a seasonally adjusted annual rate (SAAR) of 12.1 million units, up from last February’s 11.7 million unit pace, but weaker than the 13.1 million-unit retail pace in January 2013.

Total light-vehicle sales (retail and fleet) this month are estimated to reach 1.176 million units—up 7% from deliveries in February 2012 on a selling-day-adjusted basis.* Fleet deliveries are expected to remain at the same level as in January—accounting for 21% of the sales mix. The total light-vehicle SAAR is projected to reach 15.2 million units, which is the fourth straight month at or above 15.2 million units. Continue reading ›

U.S. New-Vehicle Sales Recovery in Progress with Higher Transaction Prices

Tyson Jominy

Tyson Jominy

As 2012 wraps up, possibly the most important trend for the U.S. auto industry is that new-vehicle sales continue their recovery. Light-vehicle demand continues to increase. Retail sales in calendar 2012 will likely hit 11.74 million units, up from 10.3 million units in 2011. Growth is expected to continue into 2013—our retail sales forecast for next year is 12.25 million units. The forecast assumes that there is a deal reached in Washington, D.C. before the so-called “fiscal cliff” constellation of tax hikes and expenditure cuts are slated to happen at the start of 2013. Three other major trends that we see looking at our Power Information Network® (PIN) data include:

OEM Emphasis on Transaction-Price Growth

While industry sales volumes are increasing, they are still well below the levels recorded in 2004-2007, when annual retail sales were in the 13-14 million-unit range. The primary reason that the industry has not rebounded to these record sales levels is a change in focus among OEMs. Automakers now emphasize strong transaction prices in addition to sales volumes.

This change is evidenced by the record transaction prices that are being earned across the industry. For example, in early 2010, average retail transaction prices were slightly more than $27,000, while at the end of 2012, we have observed average transaction prices approaching $30,000. These strong transaction prices are helping to offset lower volumes, and are driving increased profitability for OEMs. Continue reading ›

Lower Monthly Payments, Easier Financing Terms Boost New Vehicle Deals

Thomas King

More new-vehicle buyers are financing their purchases as car prices continue to rise. This year through August, well over one-half (59%) of new-vehicle buyers took out a loan, which is up from 53% in 2007, according to our Power Information Network® (PIN) retail transaction data.

Through August this year, the average monthly loan payment on a car fell to $462, which is down from 5 years ago (2007), when the average monthly payment was $483. Yet, the average new-vehicle transaction price has risen to $28,096 this year. Five years ago, PIN data recorded an average new-vehicle transaction price of $26,558. This represents an increase of almost 6%.

Leasing, which also has become more affordable as the cost of borrowing falls, accounted for more than one-fifth, or 21%, of transactions through August this year, up slightly from 20% in 2007. Our expectation is that the lease mix will be similar to current levels into 2013. However, since overall retail demand is expected to rise, so will the number of lease sales. In addition, we anticipate that fleet volumes will increase heading into 2013. Continue reading ›

Transaction Prices Rise Long-Term, but Remain Stable in the Short-Term

Thomas King

Recently, Thomas King, senior director of our Power Information Network® (PIN), looked at current trends in retail transaction prices for the auto industry based on PIN real-time data and analysis. A few questions that he considered from media requests and his responses are highlighted:

Q: Are average transaction prices for the industry increasing?

TK: From a long-term perspective, yes, industry transaction prices have risen by a large amount. In 2008, the average transaction price for a new retail vehicle sale was $25,505 and by 2011 that had risen to $28,337. That’s a difference of $2,832, or slightly more than 11%.

Q: Why have transaction prices risen over the long term?

TK: Better alignment between supply and demand means that OEMs are selling a richer mix of vehicles with lower incentives. It should be noted, however, that the decline in incentive spending only partially explains the rise in transaction prices. In 2008, average incentive spending per unit was $3,018, but by 2011 it had fallen by $332 to an average $2,686. The balance of the increase in transaction prices is due to stronger new-vehicle pricing and a richer mix of vehicles being sold (vehicles with more features and equipment). Continue reading ›

Higher Gas Prices, Easier Credit Drives Shift to Smaller Vehicles

Tim Dunne

While light-vehicle sales have been strong in the first quarter of 2012, rising gasoline prices—which averaged $3.92 nationwide at the end of March (according to AAA’s Daily Fuel Gauge Report)—have convinced many consumers to purchase smaller, more fuel-efficient vehicles.

Through the first two months of the year, sales of sub-compact and compact passenger cars have accounted for approximately 25% of all retail sales. Sales of sub-compact vehicles have increased the most, up more than 35% in the first two months of 2012, compared to the same period in 2011.

Yesterday’s sales update with March delivery numbers confirms the trend since sub-compact vehicle sales soared 36.3% and total U.S. new light-vehicle sales reached 1.4 million units, according to LMC Automotive, which is the highest monthly total since 2008, based on analysis from our Power Information Network® (PIN) and LMC Automotive.*

J.D. Power’s John Humphrey, senior vice president of global automotive operations, suggests that higher vehicle sales are obviously welcome news for the U.S. automotive industry and general economy, but he points out that automakers are going to have to closely monitor shifts in segment demand and build accordingly. Continue reading ›

US Retail Sales Post Double-Digit Climb in November 2011

US retail light-vehicle sales in November rose 14.8% from a year ago to 818,609 units, which translates to a seasonally adjusted selling pace (SAAR) of 11.7 million units, based on analysis by J.D. Power’s Power Information Network® (PIN) and LMC Automotive. The sales pace in November was much stronger than the 9.7 million-unit pace in November 2010 and also surpassed October’s retail sales rate.

Fleet sales in November were less than 175,000 units and down 10.6% from a year ago. The fleet SAAR of 1.9 million units receded from 2.5 million units in November 2010. Continue reading ›

Compact Crossovers, Not Minivans, are Favorites with Female Buyers

Grace Hamulic

Compacts, especially compact crossovers (CUVs), which are small, car-based utilities, are even more popular with female new-vehicle buyers and lessees this year than they were a year ago, according to J.D. Power research.

During the first 8 months (January-August) of 2011, six of the 10 new-vehicle models with the highest percentages of female purchasers or lessees were compact CUVs, and the other four were compact car models, according to our Power Information Network® (PIN) retail transaction data. During the same time period a year ago, the 10 models with the highest percentages of female buyers/lessees also were compacts, but only five of the 10 were compact CUVs. Continue reading ›