Holiday Weekend Could Be Big For Car Companies, Dealers
DETROIT (WWJ) - Car dealers are expected to be busy this holiday weekend, as try to take advantage of consumers who are more willing to spend, and have more access to credit.
The projections that May will be another strong sales month not only take into account sales booked at dealers during the first couple of weeks, but also the anticipation of a strong Memorial Day weekend.
"Really that final push comes during that Memorial Day sales weekend," said Alec Gutierrez, Kelly Blue Book's senior market analyst. "We find that there's usually some excellent cash incentives available."
Gutierrez says inventories are well stocked, and many brands are running special Memorial Day promotions.
"Consumers looking for a deal, they are going to find excellent incentive opportunities. They are going to find great availability."
Major forecasting firms are projecting solid May sales. Kelly Blue Book projects a 6 percent year over year improvement.
TrueCar.com is even more bullish on the month, projecting sales to rise 8.5 percent over May of 2012.
"A key reason for this is primarily a surge in the large end of the market, full size trucks in particular," says True Car Vice President Larry Dominique. "We're expecting to see probably about a 22 percent increase, compared to nine percent for the rest of the industry."
Dominique says some of that strong interest in pickup comes as the overall economy is recovering. Some comes as customers see good deals on pickups and a lot of new products that are much better than the older trucks they are currently driving.
"Interest rates are still low," he said. "The new trucks are out there touting higher fuel economy, better overall fuel economy, and that's stimulating a lot of interest in that market."
GM and Ford are expected to get a lot of help from strong pickup sales. Some forecasters put Ford sales in the 20 percent range. Brands that don't have pickups, like Kia and Hyundai, are expected to be flat.
But, even a new Ram pickup is not be enough to offset product shortages at Jeep, potentially ending Chrysler's streak of year-over-year sales increases at 37 months.
"We still expect Chrysler to do well," said Dominique. "But, you know, that year-over-year trend is tough to beat on a continuous basis."
TrueCar.com says, despite the good holiday weekend deal, incentive spending is down an average of three percent from last year.
JD Power and LMC Automotive, which project an 8 percent sales gain, says in addition, customers are purchasing higher end trims, with more options, pushing up the average transaction price of a vehicle.
Those customers are able to do this, in many cases, because credit is more available, and they are taking out longer term loans. In some cases up to 72 months or longer.
"Collectively, these components mean that while industry new-vehicle transaction prices have risen by 19 percent during the past six years ($28,921 in May 2013 from $24,404 in May 2008), the average monthly payment for new-car buyers and lessees has increased only 3 percent ($455 in May 2013 vs. $443 in May 2008)," said John Humphrey, senior vice president of the global automotive practice at J.D. Power & Associates. "This market dynamic is enabling consumers to purchase new vehicles with improved fuel economy, safety and technology at an affordable monthly payment."
May car and truck sales figures will be released by carmakers on June 3rd.
It's an important month for the industry, says Kelly Blue Book's Gutierrez, as the generally nicer weather has more consumers interested in buying a new car. So, sales are generally stronger than other months, and a lot of that is due to a solid close.
"They hit one their highest points all year during the month of May. A lot of that is driven by Memorial Day Weekend."
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