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Consumers Buying New Vehicles at Record Pace
WESTLAKE VILLAGE, Calif. -- Retail sales of new light vehicles are projected to reach their highest level for the month of April since 2005, says a survey conducted for J.D. Power and LMC Automotive. Sales are expected to come in at 1.1 million units, up 5% from last April, they said Thursday.
The seasonally adjusted annualized selling rate is projected to be 13.3 million units, more than 700,000 higher than a year ago.
Consumers are expected to spend $33.5 billion on new vehicles this month, which would be a record for April. The previous high was $30.5 billion in 2005.
"The April 2014 consumer spending reflects a combination of record average transaction prices -- which, at nearly $29,800, surpasses the previous April high of $28,754 in 2013 -- and strong retail sales volume," said John Humphrey, senior vice president of the global automotive practice at J.D. Power.
Buyers 35 years of age and younger look to account for 25% of retail sales of new vehicles, marking a rebound to pre-recession levels. In addition, nearly one-third of new vehicles sold in April will be financed with a loan of 72 months or longer, with younger buyers in particular using the longer-term loans to manage their monthly payments. "Among buyers who are 35 years old and younger, 44% opt for 72-month or longer loans,” Humphrey noted, “while only 25% of those 55 and older use an extended loan term."
Total light-vehicle sales are expected to reach 1.4 million units this month, a 4% increase from a year ago. Fleet sales are forecast to increase 3% year over year with fleet share of total light-vehicle sales remaining below 20%. Fleet sales through April are projected to be down nearly 6% from the same time a yearago. For the full year, retail sales growth is expected to outpace fleet market growth, Power and LMC say.
LMC Automotive's forecast for total light-vehicle sales this year remains 16.1 million units. "Auto sales are hitting their stride as the spring selling season begins, and the pace has returned to the level expected at this stage of the recovery," said Jeff Schuster, senior vice president of forecasting at LMC. "Fueling the growth further as the year progresses is a very robust level of new-model activity, with 63 new or redesigned models expected to hit showrooms, a 60% increase from last year."
The increased availability of vehicles, including premium nameplates at lower prices, is expected to increase that segment’s share of total sales to 13%, up from 12% in 2013. The growth is concentrated in the small premium-car segment where sales are expected to nearly double from 2013. "Nearly one-half of the new-model activity in 2014 will be premium vehicles, which is expected to create new competition for mainstream segments as premium price points cross into those of many non-premium models," Schuster reports.
North American production in the first quarter is finishing at nearly 4.2 million units, up nearly 4%, compared with the first quarter a year ago. LMC Automotive has increased its production forecast for 2014 by 100,000 to 16.6 million units, a 3% increase from 2013. Much of the growth is the result of a 21% increase in the production of premium vehicles compared with 2013.
Published by The Business Journal, Youngstown, Ohio.
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