BANDON - Based on the first 19 days of April, the auto industry is on track to sell 1.25 million units, 7.8 percent increase vs. a year ago, according to CNW Research. That would put the True Delivery Rate at 14.68 million units for the year.
The market research firm also noted a 13 percent increase in floor traffic from a year ago, which it attributed to consumers wanting to see new arrivals inside showrooms, reported F&I and Showroom magazine. That’s why closing ratios slowed somewhat, CNW said, but remained 5.5 percent ahead of last year.
“Same store” sales were also up by more than 7 percent, excluding stores closed for major remodels and stores in the process of moving or going out of business. But CNW’s Art Spinella noted that economic concerns among potential buyers continue to persist.
“The persistent problem of climbing concerns related to home-centric economics hasn’t diminished and, in fact, rose another 2.1 percent in the first half of April,” Spinella wrote in his monthly newsletter. “That has been somewhat offset by continued higher acceptance of subprime loan approvals, which are helping drive the market.”
The share of consumers with subprime credit visiting dealerships grew by 19 percent from last year’s 7.5 percent read, indicating that shoppers with poor credit are feeling more confident about their ability to acquire a new car or truck.
As for used, the days’ supply issue continues to plaque the segment, declining by another 1.3 percent vs. a year ago. “While a smaller gain than in the past few months, it is still an important metric and clearly responsible for the increased sales prices registered in the first 19 days of the month,” Spinella wrote.
Consumers who are buying new cars are increasingly willing to pay a bit more even though discounts dipped nearly 3 percent vs. March. The average MSRP of cars purchased rose 8 percent vs. year ago, and, compared to March, MSRPs are up 1.5 percent.
Core Transaction prices were also up by 5.6 percent to $31,216 vs. April 2011 and up 2.3 percent compared to March. But those increases have come at a price, Spinella noted.
Manufacturer incentives, including special loyalty programs, dealer/salesperson enticements and regional spiffs, rose by more than 35 percent compared to last year. Spinella, however, noted that the comparison is unfair given that last April’s incentive level dropped 33 percent vs. the previous April.
“Consumers want a new vehicle, but they’ll be pushed into it just so far,” wrote Spinella. “They’re willing to spend a bit more, but not as much as the MSRP price increases. That, in turn, means returning to incentives at both the manufacturer and dealer levels.
“For manufacturers, being able to hold their grosses and not bumping up incentives too drastically slipped through 2011 and the opening days of 2012,” Spinella added. “But competition and a smaller-than-expected pool of new-car buyers forced their hand. While smarter about which types of incentives to use and where to provide them, the overall cost is still up, and will probably be higher for the rest of this year.”
