Auto dealers should sell more new cars this year – if the economy holds up and consumers feel confident enough about their spending.
U.S. new-vehicle sales last year continued their climb from the depths of the recession, finishing at about 14.5 million units. Most forecasters predict new-auto sales this year will rise to 15 million units or higher, up markedly from the low point of 10.4 million in 2009 but still below the boom times of 2000 to 2007, when annual sales topped 16 million or even 17 million units.
Jesse Toprak, an analyst with TrueCar.com, predicts sales will reach 15.5 million units this year. He bases the projected 6.9 percent increase on a combination of things: higher consumer confidence, pent-up demand and strong product selection.
The high average age of cars on the road – estimated at 11 years old – means many consumers will be ready to buy new cars, rather than continue to pour money into maintaining their old vehicles, Toprak said.
And he likes the range of products waiting for them in showrooms. “Automakers have produced the best selection of cars consumers have ever had to choose from in their history,” he said.
The destruction caused by Superstorm Sandy meant about 80,000 to 100,000 ruined vehicles had to be replaced, but Toprak said the bulk of those transactions had already taken place by the end of 2012.
One factor to watch: the performance of the Dow Jones industrial average. Toprak said car sales tend to closely track that average’s direction. “It’s really more of a barometer of consumer sentiment” rather than a reflection of how much money consumers have at their disposal to spend on vehicles, he said.
Local dealers had a positive outlook for this year, seeing good potential in a number of brands they sell.
Frank Downing Jr., president of Towne Automotive Group, said he expects double-digit growth in sales at his dealer group this year, without fallout from the “fiscal cliff” detracting from sales.
Downing said he sees two factors driving sales: more customers coming off leases and increased production by the automakers whose brands Towne sells.
Towne has almost twice as many lease terminations coming due this year than last year. “That is a big factor in one of the strongest leasing markets in the country,” Downing said.
As for production, Towne expects that manufacturers of some of the brands it sells will increase their output by 30 percent this year. As a result, the dealer group’s growth opportunities won’t be limited by a lack of available inventory, Downing said.
Towne is planning to open a stand-alone Mini dealership in Clarence, across the street from a facility it now shares with BMW.
Craig Schreiber, a co-owner of Northtown Automotive Cos., said he sees positive activity on a number of fronts entering 2013. The key, he said, is to be able to win over value-conscious consumers.
“If there’s a good story, they’re willing to listen,” he said.
Northtown opened a new home for its Lexus dealership in June 2011. Schreiber said the dealership is doing well relative to other Lexus locations upstate, but nationally, Lexus fell behind Mercedes-Benz and BMW in the race to be the top-selling luxury brand last year.
Northtown this year plans to separate its Hyundai and Subaru franchises, which are currently both located on Sheridan Drive in Amherst.
Schreiber has an added role this year, as chairman of the New York State Automobile Dealers Association.
Northtown has the region’s lone Fiat dealership. Fiat dealers around the country are hopeful that they will also get an opportunity to sell Alfa Romeos as the Italian automaker Fiat SpA makes plans to return the brand to the U.S. market.
West Herr Automotive Group, one of the largest dealer groups in the nation, is planning a number of dealership facility renovations “that are still in the discussion and planning stages,” said Scott Bieler, president of West Herr.
The dealer group has no immediate acquisitions pending, “but we would certainly pursue additional dealerships if they fit into our long-term strategic plan,” he said.
Bieler said that 2011 was the best year in the company’s history and that 2012 was expected to finish with “almost identical results.” West Herr in 2012 expected to deliver nearly 32,500 new and used vehicles.
West Herr remained active in 2012. It bought Glen Campbell Chevrolet in Amherst, giving West Herr three area Chevy dealerships. It bought land on Millersport Highway in Amherst for possible future development. And West Herr opened a new Mercedes-Benz of Rochester dealership, creating a new location for a dealership it had bought in 2010.
Bieler said he expects new-car volume to increase up to 5 percent this year, citing pent-up demand for new cars, the average age of vehicles on the road, a large number of leases coming due this year and many new vehicle models on the way.
He cited a few other trends he sees in the auto business. Leasing has continued to grow, as auto manufacturers expand their offerings and customers’ interest continues to rise. More consumers are having their cars serviced at new-car dealerships, he said, and there has been an increase in sales of used vehicles from new-car dealerships, instead of from private owners and used-car lots.
Automotive News said several forecasts of U.S. auto sales for 2013 put the total in the 15-million-units range. While that would be the best total since 2007, it would also represent a slowdown in the rate of year-over-year growth.
Local dealers annually look to the Buffalo Auto Show, scheduled for Feb. 6-10, to give auto sales an early-year jolt. The Buffalo Niagara Convention Center will be packed with shiny new vehicles at an event that has become a midwinter downtown attraction.
Nationally, dealers are watching developments in a lawsuit filed by Norman Braman, a Florida dealer who is challenging General Motors’ Essential Brand Elements program, which involves facility upgrades. Braman contends the system amounts to two-tiered pricing, which would be illegal, because participating dealers are awarded more generous incentives.
The issue resonates across the industry. Last year, the National Automobile Dealers Association released a study on “factory image programs,” focusing on automakers’ requests for dealers to upgrade their facilities and the costs and benefits associated with those programs.