Auto Sales Set to Surge
According to R.L. Polk & Co., the average age of cars and trucks in the U.S. is rising to a record 10.8 years due to the economy. Analysts feel this demand will boost sales in January, which will be the third gaining year in a row, the longest streak since 2000. Declining unemployment and a new demand for cars and trucks may drive up sales more than 6 percent to 13.6 million for the year.
Consumers like Martha Patterson are the reason for the record-breaking auto age. When she started her real-estate career in the 1990s, she was able to buy a new car every five or six years. Since the housing market collapsed, she has not been able to afford one. “I just kept holding onto my car,” said Patterson recalling how her annual commissioned sales dropped from $5 million to $1 million. “I wanted a new one, but it’s really hard to get a decent deal when you’re not making steady income.”
Toyota Motor Corp. (NYSE:TM) and Honda Motor Co. (NYSE:HMC) are expected to make the biggest gains. Loyal buyers to those companies held off buying last year while the companies faced production disruptions caused by the earthquake and tsunami in Japan and floods in Thailand. Toyota sales may gain for a third consecutive month, rising 7 percent, though Honda deliveries may drop 1.2 percent.
Chrysler Group LLC and Kia Motors Corp. are expected to lead auto-sales growth for January, supported by progression from Japanese automakers rebounding into full production. Chrysler may increase deliveries by 32 percent making for the company’s 22nd consecutive monthly sales gain. Hyundai and Kia combined are expected to make 18 percent more vehicles than a year earlier making for their 17th straight monthly sales increase.
Nissan Motor Co. may increase sales 7.6 percent and Ford Motor Co. (NYSE:F) deliveries may jump 7.9 percent. General Motors Co. (NYSE:GM) is expected sell 7.3 percent fewer cars than last year. “Unlike last January, pricing discipline is maintained,” Brian Johnson, a New York-based analyst for Barclays Capital, wrote in a January 26 research note. GM’s average spending on incentives per vehicle may drop 21 percent from a year earlier, with Toyota’s and Chrysler’s declining 17 percent and 10 percent, respectively.
The new-car market also will not be competing with the three or four-year-old cars either, whose availability is expected to decline by 5.7 million. Shoppers with older models may get less at trade-in, but they also may not owe money on their car. “New-vehicle buyers are usually trading in three-, four, five-year-old vehicles,” Thomas Webb, chief economist for Manheim Consulting, said in an interview. “They will be trading in an older vehicle now, which means they might have actually paid off the loan and have some positive equity. That’s supportive to the new-vehicle market.”