It’s March Madness, that’s for sure. No, I’m not referring to basketball. I’m referring to automotive sales. Many auto companies have reported large increases in car and truck sales for the month of March.
General Motors reported a 12 percent increase, Nissan’s sales rose 12.5 percent, Hyundai’s American sales were up 13 percent, and Volkswagon said its March sales rose a whopping 35 percent. Ford Motor Company reported a 5 percent increase in sales, while Chrysler Group reported an astonishing 34 percent increase from March 2011 in sales this year in cars and trucks. For both Ford and Chrysler, this is the highest level in at least four years. AutoNation, the country’s largest dealership chain, says sales went up 26 percent for domestic brands, 10 percent for import brands, and 10 percent for luxury vehicles. Interestingly, this March has seen an auto sales increase in other countries around the world, such as India.
One would assume that due to the extreme price of gas these days would deter people from purchasing a car. The national average for regular gas is $3.92 per gallon, according to the AAA. One might think that the higher “green” awareness, the knowledge that smoke and exhaust from cars harms the environment, pervasive in the marketplace today would also deter people from buying them.
However, this is just not the case. On the one hand, people are buying more hybrid, “eco-friendly” cars, to deal with the aforementioned issues, but they’re still buying. And they’re not spending less, either. On the contrary, people are now paying more for cars than ever before.
“Consumers aren’t overreacting to gas price rises,” said Don Johnson, G.M.’s vice president for United States sales operations. “They’re not panicking and going from a full-sized pickup to a small car that doesn’t give them the same utility.”
Why are more cars being bought? A few possible explanations may be the decrease in unemployment in recent months, warm weather helping bring customers out of their houses and into dealerships, and a wider availability of auto financing. People who delayed buying a car during the economic downturn are now venturing out and buying. Ellen Hughes-Cromwick, Ford Motor Co-Economist, so aptly put it: “People are going back to work and the vehicle stock…is ripe for replacement.” People are also getting rid of their old cars and replacing them with newer cars as the economy recover and gas prices rise.
In addition, the average credit score for new car buyers is at an all time low; it hasn’t been this low since the first half of 2008. This makes the car market an easier place to navigate for new consumers, which is always a good thing; buying a car for the first time can be confusing, and the easier it is, the better the person feels about their purchase.
Analysts say they expect 1.4 million cars to be sold. This is 15 percent more than a year ago and the most since 2007. John Humphrey, senior vice president of global automotive operations at J.D. Power and Associates, says, “Barring any future shock related to geopolitical issues in the gulf region and further upward pressure on the price of oil, we believe sales will continue on a solid pace for the balance of the year.”