A study by CNW Research predicts the auto industry should close out December in fine fashion. The firm is basing its outlook on what it saw in November, with several key indicators showing year-over-year gains.
Art Spinella wrote in his firm’s monthly newsletter that consumers are buying again after five years of holding back on new- and used-car acquisitions. And according to Spinella, consumers aren’t just buying for themselves.
“If intentions hold true, this December’s new-car sales should get a significant boost in the share of new vehicles under the Christmas tree,” Spinella wrote. “In CNW’s ongoing Purchase Path surveys, nearly 2.2 percent of those intending to make a new-vehicle acquisition in December say it will be for a spouse, partner, child or other loved one. That is the best share since 2006.”
The industry exited November with closing ratios at nearly 35 percent, which was down 12 percent from a year ago, according to CNW. But Spinella wrote that the drop is a reflection of higher floor traffic, as consumers continue to return to the new-car market and are simply venturing into showrooms to see what’s new.
“They are likely to become serious buyers within the coming six months,” Spinella wrote, adding that same-store sales were up more than nine percent through the first three quarters of November.
CNW’s Jitter Index, which measures consumer optimism, also offered good news. It declined 1.36 percent from October to November, the biggest month-to-month drop in years. “Add to that a 0.6 percent decline vs. the same month a year ago and the trend is becoming clear: If nothing disrupts the growing optimism among Americans, the economic outlook is on a good track to recover by the end of 2013,” Spinella noted.
“That said, the current 7.82 (on a 10-point scale) is still well above the opening months of the recession in 2008 or the excellent years of 2005-2007, when the overall index was in the 3 to 4.7 levels,” Spinella added. “Consumers are still highly concerned about federal taxes (9.81), local taxes (9.84), gasoline prices (8.32) and food prices (9.69), but are less worried about the condition of investments, meeting ‘Day to Day Needs’ or the stability of their current employment.”
The industry, particularly used-vehicle sales, also got a boost from Hurricane Sandy. The superstorm did pull a quarter million used cars out of the market, Spinella wrote, but it also pushed many “postponers” back into the market in November.
“Used-vehicle sales are on track to best 3 million units, up 17.6 percent vs. a year ago, with franchised dealers up 39 percent and independent dealers climbing 41 percent,” Spinella noted. He added that casual sales, or private sales, are suffering under this trend, as franchised dealers are becoming more aggressive in selling used cars and are having vehicles shipped to the Northeast from as far away as California to meet the demand there.
“Digging out of the recession continues to be hard going for many, but never underestimate the willingness of American consumers to spend money,” wrote Spinella. “After nearly five years of holding back on new- and used-car acquisitions, vehicles have rejoined the living. And as the improved Jitter Index indicates, there is a good chance the auto industry could benefit dramatically in 2013 as credit eases and more wallets are opened.”
(Source: F&I Magazine, 11/29/12)