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Auto Sales Outlook Remains Strong, according to J.D. Power and Associates and LMC Automotive

3/21/2013
The latest sales report and forecast from J.D. Power and Associates' Power Information Network(R) and LMC Automotive indicates that new-vehicle sales remain strong in March, and predicts continued year-over-year improvement through the remainder of 2013.

"Building on the current performance, we expect the economic environment to improve throughout 2013, as the likelihood of a dark cloud slowing the recovery pace diminishes," said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "Consumers do not appear phased by headwinds from Washington, as growth in auto sales are outperforming earlier expectations."

March 2013 sales are forecast to total 1,158,000 vehicles, representing an 8% increase from March 2012. Automakers are also balancing supply with demand, starting March with a 64-day supply of cars and trucks. A 60-day supply is considered ideal.

This month, J.D. Power and LMC Automotive report that retail transaction prices are up 3%, compared with March 2012, with consumers spending an average of $28,504 for a vehicle. Additionally, more consumers are leasing new vehicles, as leases account for 23.1% of retail transactions, compared with 20% in March 2012. Record numbers of consumers are also financing their vehicle for a longer period of time, with 32.1% of consumers choosing a 72-month loan term, compared with 30.4% in March of last year.

"While longer loan terms have traditionally been a cause for concern to the industry due to the risk of purchase cycle extension, it is not necessarily as daunting as it may seem," said John Humphrey, senior vice president of the global automotive practice at J.D. Power and Associates.

Humphrey cites as positive offsets to the trend toward longer loan terms both the increase in leasing and lower interest rates that allow new-vehicle buyers to pay down their loan principal at a faster rate, and reminds the industry that longer loan terms and low interest rates are allowing buyers who might otherwise be shut out of the market to purchase new vehicles.

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