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3 reasons to be optimistic about 2012 sales

January 23, 2012
By Mark Scarpelli, Metro Chicago NADA Director
 
I read a story last month that made me even more optimistic about this year. It was about a young woman in Bakersfield, Calif., who recently got a job as a cashier and receptionist at a Mazda-Mitsubishi dealership. Within a few months, Jade Tolentino was promoted to an accounts payable position and, after putting it off for quite some time, bought a new SUV using her employee discount and today’s incredibly low finance rates.
 
When asked why she did it, the 24-year-old said, “It was a step I felt I needed to take.” Translation: this is one example of pent-up demand—and pent-up demand is what is expected to drive up sales this year.
 
Thankfully, stories like hers are becoming more common these days, as dealerships begin hiring again and consumer spending picks up. Both trends are good news for our industry, and enough reason for NADA Chief Economist Paul Taylor to forecast that we will sell about 1 million more cars and trucks in 2012 than we sold in 2011. Paul is predicting sales of more than 13.9 million units this year, driven by three factors: aging vehicles, affordable credit and aggressive incentives.
 
Together, these three “A’s” have the potential to make 2012 a much better year, Taylor said. As we know, more consumers are shopping out of necessity to replace their old cars and trucks. Interest rates on new car loans are at historic lows. And both domestic and international auto manufacturers are preparing to wage an aggressive battle to capture U.S. market share by rebuilding their inventories and offering competitive sales incentives.
 
A decline in gasoline prices also could push car buyers to consider a wider range of vehicles in different segments.
 
If Paul’s forecast is correct—and he has a very good track record for accuracy—dealers and consumers could be in for a very good year. Stories like Jade’s could be repeated all over the country, a reminder to us all that the American dream of owning a car—one of the most important factors in sustaining employment—is still alive and well.
 
In legislative and regulatory news . . .
 
• The long-awaited Driven Management Guide, “A Dealer Guide to Federal Excise Tax Compliance,” is completely new, expanded, and up-to-the minute, and has been posted to NADA University’s Resource Toolbox. This guide addresses common FET issues, and enables truck dealers to apply the tax correctly or to make reasonable assessments in instances where the rules are unclear.
 
The guide has been written for NADA by FET experts Mark H. Sidman and Rose-Michele Nardi of Weiner Brodsky Sidman Kider PC. NADA U is providing the guide as a fully downloadable publication, including an interactive Form 720—and offering it in individual chapters with tests so that it is a completely trackable educational resource for those ATD members who want to be able to train employees on the intricacies of the FET rules. The guide, located in Resource Toolbox, Driven, Legal/Regulatory, is free of charge to members.
 
In other NADA news . . .
 
• An email with the subject line “Complaint from your customers” may be a scam, according to an urgent alert issued by the Council of Better Business Bureaus. The Council is warning businesses and consumers that the return email address, riskmanager@bbb.org, is not an address the BBB uses. The fake email is signed with the address of the Council of Better Business Bureaus, which is the national office of the BBB system, but links to a non-BBB website. “Do NOT click on the link,” BBB spokesperson Kelsey Owen warns.
 
• The 2010 NADA Convention and Expo, held in Orlando, Fla., received the prestigious Gold 100 award from Trade Show Executive magazine. The NADA gathering was ranked as one of the largest U.S. trade shows in 2010 based on net square feet of paid exhibit space.
 
“The Gold 100 ranking places the NADA Convention and Expo with an elite group of trade shows across the country,” said Steve Pitt, NADA vice president of conventions and expositions. “We’re honored to be recognized as part of this elite group and setting the gold standard for the trade show industry.”
 
• A two-month reduction in fleet supply and continued strong demand pushed AuctionNet® wholesale prices over the first half of December up by a considerable 2 percent relative to November, according to the NADA Used Car Guide.  This result dramatically exceeds the historical average of about one-half of 1 percent for the period.
 
At a segment and model year level, lighter fleet volume and sought-after CPO stock continue to push up 2009-2011 MY prices more than their older counterparts.  Mid-size vans and SUVs are outperforming most other segments with month-to-date price growth averaging just below 3 percent.
 
Assuming current levels hold, wholesale prices will finish the year up by 3.6 percent. Compact and near-luxury car appreciation is leading all other segments at 9.5 percent and 6 percent, respectively.
 
 

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