McLEAN, Va. -

It’s likely that used supply is only going to get tougher for dealers this year, but it may not be as challenging as initially projected.

The latest Guidelines report issued by NADA Used Car Guide in mid-February forecasts that used supply for 2012 will slide 3 percent year-over-year, a more moderate decrease than the 7-percent drop-off the guide had projected a month earlier.

“We’ve modified our forecast from last month to account for an anticipated influx of trade-ins stimulated by slowly improving economic conditions and strong trade-in values,” Jonathan Banks, senior analyst with NADA Used Car Guide, explained in the report.

“As a result, we’re now projecting that total used supply for vehicles up to eight years in age will decline by 3 percent and that retail supply will fall by just 1 percent,” he added.

In its January analysis, NADA Used Car Guide had called for both used fleet and used retail supply to drop 6 percent. In February, it trimmed the retail drop to 1 percent and the fleet decline to 2 percent.

Analysts still believe, however, off-lease volume will fall 22 percent this year (the same as their full-year expectation in January). And despite this silver lining, the overall used supply picture is still fairly cumbersome.

“As we stated last month in Guidelines, less than a half dozen of NADA’s twenty-four segments will see an uptick in supply this year, with supply for the remainder either holding steady or continuing to erode,” Banks emphasized.

“Some nine segments — predominantly large cars, midsize vans, large SUVs and luxury cars — will experience supply losses in the double-digits,” he continued.

As reported in Auto Remarketing recently, CNW Research was echoing many of Banks’ sentiments in his used supply analysis back in January. At the time of his report, used supply was at 44.3 days. No month in 2011 ever got that low.

Illustrating how much used supply has dropped in recent years, Spinella said the early 2000s sometime saw the market at 70 to 80 days’ supply of used vehicles. Moreover, as recently as November 2008, there was 86 days’ worth of used cars on dealer lots.

“Dealers continue to struggle finding the right vehicles for their inventory,” Spinella said in January.

New-Vehicle Supply, Production

Meanwhile, supply on the new-car side of the market has seen its own set of challenges as of late, with some of the Japanese automakers only recently emerging out of crisis stemming from the tsunami and flooding in Asia last year.

That said, things look a little brighter.

LMC Automotive noted in a recent analysis that there was a 22-percent year-over-year uptick in production in North America during Japanese. Japanese OEMs showed especially strong momentum, as they increased production by 26 percent year-over-year last month.

Domestics and Europeans automakers each jumped about 19 percent. There was roughly a 24-percent uptick for the Hyundai group of carmakers.

LMC Automotive is calling for first-quarter North American production to climb 10 percent to 3.7 million units, and they project full-year production will rise 7 percent to 14.0 million units.

“As the outlook for demand improves and inventory stabilizes, LMC Automotive has increased its North American production outlook for 2012,” said senior vice president of forecasting Jeff Schuster.

At the beginning of this month, there was 66 days’ supply of new vehicles, marking a 14-day increase from January, LMC Automotive said. Put another way, Kelley Blue Book said that dealerships had to close to 2.5 million new vehicles as of Feb. 1.

By segment, car supply increased five days and totaled 60 days, and trucks jumped 22 days to come in at a 72-day supply, according to LMC.

Breaking it down by automaker, the Big 3 automakers had the sharpest upticks in supply, KBB said, as inventory for each was higher than 80 days. Toyota, Honda and Nissan were all above a 50-day supply, with Hyundai and Kia lower than 30 days.

Likewise, LMC noted that BMW, Hyundai and Subaru “continue to have supply constraints with inventory levels under a 40-day supply, which could impact sales performance of some models.”

Editor’s Note: This is the third story in a three-part series from Auto Remarketing on February sales projections, gas prices and the production/supply dynamic. Click on the following links to access the first two stories: Part I — Sales Projections; Part II — Gas Prices.