If Memorial Day weekend is any indication, automakers and dealers could be gearing up for their best Summer since 2008.
I’m not usually one to make predictions, but the optimism in the auto industry is palpable. Sure, the economy could always throw a wrench into things. With that said, what might we expect for the Summer?
Sales pace: Increasingly, there’s chatter of the sales rate in June, July and August moving over 14.5 million vehicles. That’s not a huge surge from the 14.2/14.3 range we’ve seen this Spring, but it would be another step up.
What would drive Summer sales? Dealers are still seeing pent-up demand because people are driving older cars and trucks.
Add to that a slowly improving economy and moderating gas prices (both are far from certain) and you see why the automakers are hopeful. Still, consumer confidence is one of the biggest indicators for auto sales. The May number is the lowest for consumer confidence since January.
Expanding credit: It has become far easier for dealers to write auto loans for those who with less than prime credit. That’s about 23% of the auto loans written every month. As the credit loosens up, it will expand the pool of potential car buyers who will get approved for an auto loan.
This always worries people who think dealers are selling cars to people who can’t afford it. Keep in mind, repos and loan defaults remain low.
Strong used car prices: With used car prices remaining relatively high due to a tight supply of models 3-4 years old (the most in-demand age of used cars/trucks) many people are moving to trade-in their older car for a new one. For many, it’s not a huge stretch financially.
Look at the latest data from Experian Automotive. It shows the average new car payment is $461, just a dollar higher than it was last year. As long as buyers can keep their monthly payment within a range that works, they will pull the trigger and buy a new model.
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