Edmunds Predicts Dip In August Sales Over July

It was this time last year that the government launched the Cash-for-Clunkers program, an effort to inject adrenalin into a fibrillating auto economy by dangling incentives on new cars for consumers who traded in. Have things improved? Well, not as much as auto seers had hoped., which does a monthly sales prediction based on dealership activity, and famously earned the ire of the administration for pointing out that Cash for Clunkers didn't so much create new sales as much as shift the sands of demand around the box, says this month's numbers will show that the economy still needs defibrillator paddles.

The firm says this month's sales will likely be 1,028,200. If so, August sales will actually be 17.7% lower than the month last year and 1.4% lower than last month.

"Based on the pattern of previous recessions, new car sales should have recovered 71% from 2009's low point," said senior analyst Karl Brauer in a company report, "What's Really Holding Back the Auto Industry." He says things won't change either because the factors depressing auto recovery now will continue for the foreseeable future, keeping sales in the 12-million-per-year range through next year.



Brauer says high unemployment, high consumer debt and a substantial drop in home and stock values are putting the brakes on recovery. "These factors are curtailing consumer confidence and reducing willingness to commit to long-term financial obligations such as a new-vehicle purchase," he says, adding that the government has less ability to stimulate new-vehicle sales than it has in past recessions.

Although rates are at historic lows -- averaging 4% -- the fish aren't biting. "Rock-bottom rates theoretically would encourage sales, but the near-perpetual availability of low-cost loans means buyers don't find cheap financing much of an inducement anymore," he writes, "particularly if there are other pressures on household finances."

And pressures are not lessening. Brauer says the recession even had would-be new-car buyers giving greater consideration to used cars when it comes time to replace a vehicle.

"Normally, there's pent-up demand when consumers stop buying new cars that is balanced by an eventual spike in new-car sales. But today's vehicle owners are hanging onto their vehicles longer, and when they do finally decide it's time for a replacement, many are shopping lower-priced used cars instead of new," he writes. data says the average price paid for a three-year-old used vehicle in July was up 10.3% compared with last year. And for many individual models, used prices have spiked well into double-digit percentages.


But the firm also says it's a bit of a fallacy to compare this month to the month last year because the Cash for Clunkers artificially and dramatically increased sales. The firm predicts that, adjusted for fewer selling days this month versus the month last year, most automakers are seeing big drops.

One exception is Chrysler -- which had a near-death experience last year and may see an 11.6% improvement in August, if Edmunds is correct. The firm predicts Ford sales will drop 6.9%, while GM sales will drop 20.1% inclusive of brands like Hummer and Saab that are officially no longer around. Honda, Nissan and Toyota will see 24.7%, 23.5% and 25.4% drops in sales this month versus the month last year, respectively.

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