Getting credit is now easier for new-vehicle buyers – an indicator that US auto sales will continue to increase its pace after having posted a seasonally adjusted annual rate of 12.2 million last September. According to the Automotive News Data Center, this is its fastest pace since August 2009, which is when sales had been boosted by the government's “cash for clunkers” program.
Ellen Hughes-Cromwick, Ford's chief economist, said that according to Federal Reserve data, banks started easing consumer- lending standards in July. She also said that the Fed's loan facility program revived the market for securitized auto debt. CNW Research revealed information that shows higher sales for buyers with weaker credit scores.
In a phone interview, Hughes-Cromwick said that in general, credit has “begun to ease” for the automotive sector. She expects that we should soon see evidence of how it’s contributing to the recovery; however, she thinks that a “sizable cyclical uplift in the next 12 to 18 months” won’t be reported soon.
Auto retailers, such as Group 1 Automotive Inc. and CarMax Inc., consider credit to be less of a setback now. Tighter lending had slowed down US auto sales to only reach 10.4 million deliveries last year, the lowest figure since 1982.
Last month’s sales may have been impressive but this figure is still lower than the 16.8 million annual average from 2000 to 2007, as Americans put off making big purchases in the midst of weak consumer confidence and a high unemployment rate.
According to the Labor Department, payrolls had dropped by 95,000 workers last month, higher than what a Bloomberg survey of economists had forecasted. The unemployment rate also remained at 9.6 percent. Peter DeLongchamps, a vice president at Houston-based Group 1 Automotive, said that credit is “certainly available” to meet the needs of the customers. He added that for sales to increase further, there has to be more showroom traffic.
Headquartered in Richmond, Virginia, CarMax is considered as the largest used-car retailer in the United States. It was originally a concept proposed by a consultant tapped to assess possible business opportunities. The company was eventually formed in 1993 as a subsidiary of Circuit City. In 2002, CarMax officially split from Circuit City, after spinning off as a stock dividend for Circuit City shareholders.
A Delaware corporation headquartered in Houston, Texas, Group 1 Automotive, Inc. operates automotive dealerships and collision centers not only in the US, but also in the United Kingdom. [via autonews - sub. required]