The U.S. auto market is doing better than economists are giving it credit for because of a new untracked phenomena: The certified preowned vehicle.
Even though gasoline prices have plunged below $3 and consumer confidence is running high, auto sales figures have missed economists' expectations as of late.
Economists are being thrown off because certified preowned sales are stealing market share from new cars. The sales figures aren't part of the nation's gross domestic product calculation, and you can't find them anywhere in the vast Federal Reserve databases.
While new car sales increased by 6.1 percent to a 16.5 million annual rate in October, certified preowned sales raced ahead by 10 percent, on track for a record 2.3 million units sold in 2014, according to a report from Wall Street firm Convergex.
Certified preowned sales "may not make it into the GDP calculations but, as near-substitutes for new cars, their growth is a promising sign of continued strength in overall light vehicle demand," Convergex's Nicholas Colas said in the note, citing data from Automotive News.
Auto sales will top 19 million in 2014 with certified preowned figures added in to the total figure, better than the 17 million to 18 million annual sales in the three years leading up to the credit crisis in 2008, according to Bureau of Economic Analysis figures.
Auto companies established certified preowned vehicle programs in the late 1990s to solve a problem, according to Colas. A third of new and car truck sales were actually leases and so auto companies technically owned these vehicles and would have to take them back if the consumer chose to not buy them at the end of 24 or 48 months. So they gave these unpurchased cars a new warranty, some reconditioning and sold them in the used car market at a higher price.
"These vehicles are essentially new-car substitutes for many buyers," said Colas. "The fact that this segment is growing faster than new vehicle sales is a promising signal on the state of the U.S. consumer."
The certified preowned vehicle's hidden factor is the kind of thing Colas, the chief market strategist at Convergex, uncovers on a daily basis in his research reports to clients. He's got a nose for uncovering things that aren't what they appear to be. In this case, car sales data is actually greater than economists believe, just without the new smell.