Auto Sales to Continue Growth in 2013, Boosted by Pent-Up Demand and Lease Returners

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Auto sales growth will continue in 2013, although at a slower rate than in recent years. Edmunds​.com forecasts sales of 15 million light vehicles in 2013, an increase of 4% over the 14.4 million expected in 2012.  Economic uncertainty due to unresolved fiscal issues at home and spillover effects from slowing economies abroad will continue to slow the pace of American economic growth, including car sales. auto

However, many of the same factors in play now will still support car sales momentum in 2013. The release of pent-up demand from buyers who deferred sales during the recession will intensify as credit conditions further loosen and the increasingly aged fleet drives more consumers back to the new car market. Importantly, sales will receive a boost in 2013 from an expected nearly 500,000 additional lease returners compared to 2012, who will lease or buy a new vehicle when their current leases terminate.

MORE SALES PER DRIVER

Edmunds.com's forecast assumes that the rate of new car sales per licensed driver will continue to increase as it has each year since hitting a recession low of 0.05 in 2009. This rate is expected to be 0.0695 in 2013.  Leasing is more readily available now, which can lead to more frequent replacement. And the rate of 0.0695 assumes conservative growth given that sales per driver have increased 10% per year on average during the recovery. (Growth of 10% in 2013 would result in a rate of sales per driver of 0.074, or 16.1 million auto sales.)

INFLUX OF LEASE RETURNERS TO CREATE SALES SURGE

Substantially more car leases will terminate in 2013 than in 2012, increasing the pool of likely buyers. The growth in lease returners reflects the slowdown in leasing during the recession that bottomed out in 2009, resulting in many fewer lessees available to return to market in 2012. The revival of leasing since 2010 should noticeably impact new car sales in 2013. Assuming that 70% of 2010 leases were 3‑year leases and 30% of 2011 leases were 2‑year leases and that 75% of lease expirations result in the lease or purchase of a new car, then 484,000 more lessees will return to the market in 2013 than in 2012.

RELEASE OF PENT-UP DEMAND: STILL GOING STRONG

In addition to returning lesses, Edmunds​.com expects other factors to contribute to auto sales in 2013 as well. In particular, the release of pent-up demand from buyers who deferred sales during the recession will not only continue in 2013, but will likely do so at a higher rate than in 2012. One source that could draw more consumers back to the market is the increasingly aging fleet — the average age of vehicles in operation reached 11 years in the first quarter of 2012, according to Experian, despite an increase in vehicle trade-in age this year. Another source could be a more favorable pricing environment. With all of the top automakers generally healthy and looking to grow, the potential for supply to outpace demand and lead to lower net prices for consumers is high.

Greater access to credit also could spur a greater release of pent-up demand in 2013. After severely contracting during the recession, credit began expanding in the first half of 2010. The share of subprime new car loans returned to pre-recession levels in the second quarter of 2012. There is also room for credit expansion in the prime segment — recent Edmunds​.com data showed that more consumers are getting auto loans with zero percent APRs, a trend that could bring out more buyers if it continues in 2013.

[Source:  Plache, Lacey.  "Edmunds​.com 2013 Auto Sales Forecast: 15 Million."  19 Sept. 2012.  Web.  19 Dec. 2012.]