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July Used Car Sales Hit “Blockbuster” Proportions

New car demand slipped as month dragged on.

by on Aug.01, 2011

Used car sales hit "blockbuster" proportions in July, according to one key industry analyst.

While July new car sales appeared to weaken as July dragged on, it appears to have been a great month for anyone with a used car to sell.

The struggling economy — and uncertain job prospects, in particular – seem to be leading many shoppers to try to curb spending by shifting to “previously owned,” rather than new vehicles, notes Art Spinella, chief analyst with CNW Marketing.

That meant an estimated 13.5% jump in use car demand last month, to 4.5 million cars, trucks and crossovers.  If the numbers hold, that would be the highest level of demand since July 2005.

Last month started out strong on the new car front, as well, according to preliminary dealer data collected by J.D. Power and Associates.  But with the jobless rate still high and the month marked by uncertainty about the federal debt and the possible impact on the economy, many buyers appear to have been holding off on visits to the showroom.

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“The auto industry is having a difficult time shaking off adversity, as vehicle sales start the second half of the year better than June, but not as strong as many people had hoped,” said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. “A recovery pattern is still expected, but the pace could be in question as reported weaker GDP growth in the first half of the year may dampen the outlook.”

The Seasonally-Adjusted Annual sales Rate, or SAAR, did improve in July, but Power data show it still only reached 11.8 million – the third month in a row below the 12 million level.

A number of analysts and industry planners have been revising downward their sales forecasts for the full year, few now expecting the American new car market to do much better than around 12.7 million.  Earlier projections had generally anticipated something at or above the 13 million mark.

While many potential new car buyers are waiting on the sidelines, according to the 2011 Automotive Outlook by AlixPartners (Click Here for that story,) it appears that many are shifting to the used car side, many opting for relatively new off-lease vehicles with like-new “certified” warranties.

Those factory-backed warranty programs have been a particular selling point for franchised dealers, who saw their sales rise an estimated 17.8% in July, to 1.667 million, according to CNW research.

Independent dealers posted an estimated 10.8% increase, to 1.651 million used vehicles.

Meanwhile, sales by private parties jumped 11.6%, to 1.178 million, estimated CNW.

The total used vehicle market generated $45.8 billion in sales.  Significantly, used vehicle prices appeared to dip slightly after nudging all-time record levels earlier in the year.  The average previously owned auto went for $10.193 in July, said CNW’s Spinella.

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