It's Official: Car Sales Are In Full Recovery


Finally, we can safely declare that U.S. car sales are in full recovery. For months, industry watchers have hesitated to make it official, insisting we needed to see another month or even another quarter of strong car sales. But with the first quarter of 2012 about over, it looks like we have a rather robust recovery in the works.

Car sales in March are coming in strong. The Seasonally Adjusted Annual Rate (SAAR) of sales is forecasted to be 14.9 million vehicles, according to Edmunds.com. In raw numbers, sales are expected to climb to almost 1.5 million vehicles in March. That would be a 17-percent gain from the year earlier and 26 percent higher than February. Edmunds.com estimates that retail SAAR will come in at 11.8 million vehicles in March, with fleet transactions accounting for 20.6 percent of total sales.

Pent-up demand caused by years of car owners holding on to their old vehicles at last is being released, helped by credit that is more readily available to a wider group of buyers, including some with less than perfect credit scores. "Vehicle trade-in rates are consistently higher than ever before, and average credit scores for new car buyers are at their lowest levels since the first half of 2008," said Edmunds.com Senior Analyst Jessica Caldwell.

Car Sales

February sales surpassed all forecasts and strong March sales suggest last month wasn't a fluke or the beneficiary of mild winter weather but part of a recovery trend. March also is an important industry bellwether since it sales rate is the highest of the year, second only to May.

Beyond the top line numbers, there are other encouraging signs. While consumers clearly are favoring smaller to midsize vehicles because of high gas prices, sales increases are almost across the board, by manufacturer and segment. The small-vehicle trend continues this month with market share of subcompact, compact and midsize vehicles is expected to climb in March from February's highs. With a 22-percent year-over-year increase, Toyota is expected to be the top performer among the Big 3 Japanese automakers, thanks to healthier inventory and more competitive favorable pricing. Chrysler's momentum continues with an expected 35-percent sales hike from a year ago.

Car Sales

Commercial vehicle sales are on the rise, suggesting businesses are finally feeling confident enough to replace their aged fleets. Regular consumers aren't just buying basic transportation but are purchasing fancy versions of cars and trucks. They are even buying sports cars, a segment particularly beaten down during the recession. Dealers are making money, and they are making it on sales of new cars, which often are loss leaders for them.

Automakers apparently are confident that this recovery is here to stay for awhile as they are boosting production to meet higher customer demand. We can expect analysts and automakers to start hiking their full-year sales forecasts soon. Most predictions are in the 13.5 million to 14.5 million range for the year; we'll probably see revised forecasts at the upper end of the range.

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