CLEVELAND -

Along with an analysis about how ongoing macroeconomic trends are pointing toward positive fortunes for dealerships, the team at KeyBanc Capital Markets attributed an upbeat conversation with Cox Automotive chief economist Tom Webb coupled with the July findings of its monthly dealer survey for producing such a “bullish” outlook.

Before delving into the takeaways from the chat with Webb, 60 percent of dealers surveyed told KeyBanc they posted a year-over-year used-vehicle sales increase in July. And 40 percent of the participants indicated that climb was more than 10 percent.

KeyBanc reported dealers generated those increases “despite the near-term headwind of grounded inventory under recall, and growth should accelerate as recalled parts are expected to come into service departments in the back half of the year.”

Furthermore, financing to turn used metal is on sure footing, too, as all of KeyBanc’s July dealer survey participants mentioned intact or increasing subprime and overall auto financing availability.

Those upbeat survey findings arrived in tandem with KeyBanc’s one-hour teleconference with Webb where analysts and the wholesale expert who is coming back again to the National Remarketing Conference at Used Car Week discussed used-vehicle pricing and demand in detail.

Webb reiterated many points he’s mentioned in previous reports from Auto Remarketing, stating that used-vehicle pricing is strong even as the supply of off-lease vehicles has been growing at 20 percent for the past couple of years, which reflects strong consumer demand.

“He believes, and we share this view, that used vehicle pricing outlook remains solid even as the off-lease volume continues to come in at about 16 percent annual growth through 2018,” KeyBanc analysts said.

“Better equipped, safer cars cost more when new and therefore they cost more when used,” they continued. “Increasing supply is a headwind, but Tom believes in this environment of strong demand and financing availability, it is an immaterial headwind, perhaps a 2-percent decline in prices, which is insignificant to demand or profitability."

Both Webb and KeyBanc noted increasing off-lease supply is good for both the new and used sales outlook.

“It supports new vehicle demand as a majority of lessees (about 80 percent to 85 percent) who turn in expired leases will leave the lot with a new vehicle lease,” KeyBanc said. “It supports used vehicle demand as it improves inventory availability.”

Additionally, KeyBanc published a new analysis of historical U.S. GDP growth, unemployment and U.S. light vehicle seasonally adjusted annual rate (SAAR). The firm noted that its analysis confirmed positive outlook for vehicle demand and dealers based on belief that:

—There is an apparent disconnect between auto stocks and the S&P 500 as, year-to-date, the S&P 500 reflects a positive investor sentiment on the U.S. economic outlook, but the same is not being reflected in the auto stocks.

—The U.S. economic forecast remains positive, in the 1 percent to 2 percent compound annual growth rate range in 2016 and 2017, and is expected to accelerate from weaker first-half growth, largely driven by consumer spending and the high-single-digit growth outlook in the housing market.

—Initial unemployment claims remain on an improving trend and the outlook remains positive, driven by a positive economic growth outlook, as there is a strong reverse correlation between them.

“If good economic outlook equals good labor markets equals good automotive demand, then good economic outlook equals good automotive demand,” analysts said.