Driven mainly by fleet sales, July saw new-vehicle sales cruise to an 11.55 million unit annual pace – the third highest level this year. And despite consumer confidence and employment continuing to mute demand, an analyst for the NADA Used Car Guide believes the industry is adapting well in this less-than 12 million sales environment.

The key has been a shift from the push-based sales strategy to brand building on the part of OEMS. The push toward profitability has resulted in stronger resale values and used prices on domestic models creeping close to their import competitors.

“The automotive industry has retooled itself to adapt and thrive in an environment of less than 12 million new-vehicle sales,” wrote Jonathan Banks, auto analyst for the National Automobile Dealers Association, in his August report. “OEMs have significantly cut their products to better align supply with demand, while the dealer focus has shifted to use used-vehicle sales and service revenue to maintain profitability.”

Banks pointed to fleet sales as an example. Once viewed as a means to dump products in an overcapacity environment, fleet sales are now viewed as key profit centers for manufacturers. This shift could benefit dealers in 2011, with a higher supply of one-year-old vehicles expected to hit the market next year.

In the near term, dealers will have to deal with a low supply of used vehicles, wrote Banks, who expects the overall pool of used models to remain constrained through 2011.

According to Bank’s report, more franchised dealers are purchasing a higher percentage of lease and customer returns, which has hurt auction volumes. However, the trend is working to close the customer satisfaction gap between the new-car and used-car buying experiences, with dealers offering more services such as extended warranties, CPO vehicles, special financing, and pricing closer to transaction price to further stabilize pricing and improve customer satisfaction.

For July, NADA used-car values experienced a minor (-2 percent to 0 percent) depreciation in most sub-segments, which was consistent with what’s happened this year.

Large SUVs and pickups, Banks wrote, continued to retain their overall strength, as they experienced little if any depreciation. Luxury vehicles, on the other hand, experienced slightly greater value depreciation than non-luxury vehicles, but even that depreciation is lighter than traditional seasonal patters.

Banks wrote that used pricing trends suggest that consumers continue to search out deals as they shy away from high-dollar vehicles in this still-weak economy. “Although we experienced more significant appreciation in used prices during the first quarter of 2010, prices during the second quarter remained relatively flat, with June posting the first signs of what could be considered normal depreciation,” Banks wrote. “AuctionNet prices for July fared better than June, with most segments remaining flat month-to-month.”

Banks wrote the used-vehicle segment hurt most by today’s high demand are three- to four-year-old vehicles, which he said could be helped out by a return of leasing.

Manufacturers are targeting their incentive spending, but Banks wrote that they do have their sights set on leasing and APR incentives. Dealer and customer cash, however, showed slight declines. Overall incentives through June were slightly down.

“Manufacturers have maintained the production and new-vehicle pricing discipline that was introduced in the summer of 2008 when fuel prices rose above $4 per gallon,” wrote Banks.

So far this year, fuel prices have remained consistent, which, despite being somewhat elevated, allowed consumers to better budget monthly vehicle expenses. It’s also brought large vehicles back into favor.

“During this period, the high-to-low spread of the average price of regular gas has been less than 44 cents, the lowest in the past five years,” wrote Banks. “This compares very well to the more than $2.34 spread witnessed during the previous 12 months, the $1.37 spread during the 12 months prior to that, and the $1.05 spread during the 12 months prior to that.”

Banks also noted continued improvement in auto financing as a key contributor to strong used prices. He wrote that several metrics are showing subprime approval rates increasing for buyers. He also wrote that recent financial data points to a return of leasing. He also noted that GM’s proposed purchase of AmeriCredit is a solid indicator that manufacturers are ready to get back into the financing game to improve sales.

“Many OEMs have eliminated or divested brands in order to focus on core competencies of their respective brands and successful dealers are incorporating better tools, strong employee retention programs, and internal processes to improve customer satisfaction,” wrote Banks. “All of these initiatives have resulted in strong used-vehicle prices and creates a strong foundation of continued strength in the used market in the upcoming months.”