Continued new vehicle gains in 2015 would mark longest consecutive industry expansion in more than a half century
TrueCar, Inc. (NASDAQ: TRUE), the negotiation-free car buying and selling mobile marketplace, finds that if the U.S. auto market expansion continues in 2015 it will mark six consecutive years of annual growth and the industry’s longest such streak in more than 50 years.
TrueCar forecasts sales will rise as much as 3 percent to about 17 million new vehicles this year, extending a rebound that began in 2010 and generating revenue of at least $550 billion. U.S. economic indicators, including GDP, housing starts, the Dow Jones Industrial Average and wages and salaries, which are all projected to strengthen in 2015, mirror that growth. Unemployment follows the trend as well, declining for a projected sixth year. Additionally, retail and food sales have grown for the past six years, while consumer confidence has risen seven months in a row.
“The industry hasn’t been at the 17 million-unit level since 2005, and considering that the U.S. population has expanded by roughly nine percent since then, it’s clear we’re in a market with strong natural growth drivers,” said John Krafcik, TrueCar’s president. “Even in the economic boom years of the 1990s the industry didn’t achieve six consecutive years of growth.”
TrueCar’s key industry metrics remain favorable. The average transaction price of a new vehicle in 2015 should rise for a sixth consecutive year to an estimated $32,589. Incentive spending as a percentage of average transaction price remains below a post-recession high of 11.2 percent in March 2009 and is hovering around 7.9 percent. Industry total revenue, on an upward trajectory for the past six years, is projected to be up 89 percent this year from to 2009.
“While some have voiced concerns about the popularity of longer loan terms, it’s important to look at the other side of auto financing: leases. Typical lease terms run 36 months. This is something of a counterbalance to lengthening loan terms as consumers who lease are back in market sooner,” Krafcik said. “Last year, the industry had the highest sustained level of lease penetration in 15 years and this has grown consecutively the past five years.”
TrueCar projects lease penetration for the total industry will reach 24 percent in 2015, up from only 13 percent in 2009.
Another positive sign for the broader economy is that consumers are saving more, according to a study by the Bureau of Economic Analysis. Personal savings as a percentage of disposable income reached 5.5 percent in January, a 12 percent jump from prior year.
