Pent Up Demand, Looser Credit Expected To Help Car Sales Momentum
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DETRIOT — (WWJ) A weak recovery isn’t expected to derail car sales going forward.
“It’s been rather tepid at best,” said Lacey Plache, chief economist with Edmunds.com.
But rising consumer confidence and pent up demand are strong enough to outweigh a stagnant labor market.
“I would say that at this point, this is not a huge source of concern for auto sales,” Plache told reporters, at a Detroit briefing.
Edmunds expects car and truck sales to rise to about 14 and a half million units this year. However, it won’t be a totally smooth rise.
CEO Jeremy Anwyl says there could be some payback in the late summer or early fall, as sales were boosted a bit higher than expected in the winter. For example, bad weather is normally a killer for car sales in the first couple of months of the year.
“We didn’t have that this year,” he said. “So that actually helped sales in January and February, even into March a bit. We had some rebound from the earthquake and tsunami this year, with sales finally back for Honda and Toyota. So that pushed sales up a little bit above the trend in January and February. Most of that’s now left the marketplace.”
Another factor helping car sales is the availability of credit, especially for buyers who may not have been able to get credit the past few years.
“There was an over correction in the direction of cutting off people who were less credit worthy,” said Plache.
“I don’t think it’s a bad thing to be taking on more risk.”
About ten per cent of buyers would be considered sub prime. Plache says while that’s a significant increase from before, it’s only half the rate we saw before the recession.
“That’s what we’re seeing rather than a hog wild lending frenzy to anybody who’s breathing.”
Edmunds senior analyst Jessica Caldwell says the looser credit has brought more people into the market looking for small vehicles. That adds to the pool of potential buyers.
“That’s definitely people that have been shut out of the market for the last few years.” she said. “People that are a necessity based purchase, not just a want based purchase. Those are the customers we really need back in the market.”
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