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February Vehicle Sales Coming in Strong

February Vehicle Sales Coming in Strong

By Jeff Youngs, February 27, 2012
American consumers are continuing to shake off the economic doldrums and buy automobiles at an increased rate this month, at a pace that is outperforming January's, according to a new sales update by J.D. Power and Associates.

When auto brands report February U.S. sales results on Thursday, they're expected to post overall retail new-vehicle sales of about 857,400 units, an increase of 5 percent from 2011, according to data compiled by the Power Information Network (PIN) and LMC Automotive.*

That number would represent a seasonally adjusted annual rate (SAAR) of sales, the figure by which industry sales trends are gauged, of 12 million units for retail sales, an increase of more than one million units over the retail SAAR in January. The industry adds fleet sales to get an overall picture of sales trends.

Such results would indicate consumer optimism continues to grow, that they are reasonably confident of improving conditions in the labor markets and their own finances, and that the hint of higher gasoline prices ahead hasn't yet dented their buying intentions.

"Retail light-vehicle sales in February are strong, which makes us modestly optimistic about the growth of sales going forward," said John Humphrey, senior vice president of global automotive operations at J.D. Power. "More so, we're increasingly confident that the fundamentals are in place to continue to support an upbeat sector outlook for the coming year."

In addition to pent-up demand for new vehicles due to an aging fleet, factors driving this optimism include a rebound in leasing and availability of consumer credit and long-term financing. Through the first 17 days of February, lease penetration was 20 percent, up from a low of 13 percent in 2009.
Meanwhile, 72-month loans account for 23 percent of all retail sales in February so far, the highest level in five years and up from 19 percent a year earlier.

"We're seeing an improvement in leasing and a slight improvement in credit availability, which is bringing customers that were shut out of the market two or three years ago back into dealerships," Humphrey said. "Both of these elements bode well for consumers in terms of making vehicles more affordable, which will drive more traffic into showrooms."

Partly as a result of such patterns, LMC Automotive has increased its forecast for total light-vehicle sales in 2012 (including fleet sales) to 14 million units, up from 13.8 million units, and to 11.4 million units for retail sales, up from 11.3 million units.

"Concerns about the financial crisis in Europe are not holding back the momentum of the automotive recovery in the U.S., said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "The industry is currently well positioned for the best performance since 2007 and is expected to approach full recovery in the next two years with total light-vehicle sales at 16 million units by 2014."

*J.D. Power and LMC Automotive have a strategic alliance to share data and produce a monthly new-vehicle retail sales forecast based on J.D. Power's real-time transaction data gathered from more than 8,900 retail franchisees throughout the United States, and LMC Automotive's analysis and intelligence.

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