BANDON, Ore -

Sparked again by the appeal of certified pre-owned units, CNW Research projected February used-vehicle sales to post a healthy year-over-year gain, strengthening an already solid foundation for the industry to reach at least 39 million units for the year.

CNW thinks February used sales could climb to 1.75 million units, a figure that would represent an 8.6-percent increase over a year ago.

President Art Spinella noted positive trends for all three used-vehicle sales segments, basing his analysis on the first eight days of the month. Spinella thinks franchise dealer sales should improve 5 percent, while independents’ performance should jump at least 11.8 percent. He also thinks private party sales should move 9 percent higher.

“Franchised used-car operations are beginning to see daylight in terms of trade-ins, although CNW estimates that fully a third are either too old or too worn out to be good pickin’s for local resale and are likely to be wholesaled to independents or auction,” Spinella explained.

“Dealer surveys indicate the problem is better than a year ago when half of the trades were unsuitable for a store’s resale lot because of condition or age,” he continued.

CPO Appeal Gains Strength

January’s certified sales climbed double digits from the same month last year, according to Autodata Corp.

Autodata indicated 123,814 CPO units were sold in January, marking a 13-percent uptick from the prior year but a 10.4-percent decrease from the previous month.

While the month-over-month comparison might have been negative, CNW continues to see the CPO market as point for dealership margin and turn gains.

“As the market continues to rebound for both new and used cars, the share of shoppers who are interested in a certified pre-owned model also grows,” Spinella stressed.

“These are the fence sitters who are willing to buy either new or used depending on the price and if the model desired is available,” he added.

Since hitting a low-water mark of $1,138 in February of last year, CNW discovered what premium buyers are willing to spend over a comparable non-CPO model has trended upward steadily. In January, the CPO premium stood at $1,384 compared with $1,202 the year before.

“This represents a similar basket of models, so the increase is relatively modest compared to a total CPO versus non-CPO figure of $1,737 versus $1,421 respectively,” Spinella explained.

For the same cluster of models, CNW also mentioned the typical turnover rate is hugely different for CPO versus non-certified units.

Spinella indicated non-certified turnover was 47.6 days in January compared with CPO models turning in 26.8 days.

“A slight crack in the attitudes, however, as a higher share of those shoppers with a propensity to select CPO over new now say they will likely opt for new,” Spinella conceded.

Used Inventory Supply Trends Near Ideal Level

CNW discovered that early February data suggests that used dealerships will have operated on only a 49.8 days’ supply of vehicles — slightly above the ideal 45 days but well below the near-90 days of late 2008 and early 2009.

Spinella explained three factors are contributing this low number.

“Dealers are being more cautious in what they buy at auction, selecting only those models that suit their market rather than seeking out the lowest price point,” Spinella stated.

“Consumers are returning to market in larger numbers, looking to replace worn out vehicles that got them through the worst of the recession but are no longer suitable for daily use,” he continued.

Spinella then noted quicker loan approvals because “vehicles are spending less time on the lot awaiting credit decisions.”

Strong February New-Vehicle Sales Performance Possible

Moving along to a new-vehicle sales discussion, CNW projected February sales will top 920,000 units with 950,000 vehicles being “a good outside bet.”

What pushed CNW to make a sales forecast that would be a 17-percent improvement over the same month of 2010 was a floor traffic rise of more than 17 percent this month as well as closing ratios climbing 6.4 percent versus a year ago,

“Even with some of the worst weather in decades hitting major markets, consumers appeared to be willing to brave the snowy roads to visit dealerships and, in an increasing number, sign new-car sales contracts,” Spinella surmised.

While the numbers are significantly better, CNW predicted that the full year is still looking at a 12.5 to 12.6 million unit true delivery rate — what Spinella said is similar to SAAR. He pointed out the true delivery rate for January was 12.55 million.

Also on the new-vehicle side, CNW determined the increase in same-store sales rose nearly 11 percent in the opening days of February.

“Much of the month-over-month potential increase is coming from points that were languishing because of threats of closure,” Spinella noted. “Also, rural stores — which weathered the last couple of years in moderately good condition — have seen only modest increases versus last year.

Jitters Index Slips Again

Spinella touched on another economic gauge — the CNW Jitters Index.

CNW indicated the index reading showed a small decline in the opening week of February versus a year ago.

“It’s continuing the easing of concerns about home-centric issues such as local taxes, food prices and fuel costs. This doesn’t mean consumer confidence is out of the woods, however,” Spinella cautioned.

“These are numbers that represent easing of concern from abnormally high levels. The country is still months and perhaps a year away from having the Jitters Index reach boom-time levels,” he continued.

Hybrid Buyers Turn Inward

Initially, CNW thinks one of the draws to hybrids, notably the Toyota Prius, was its unique style and technology.

“But that was then; this is now,” Spinella interjected.

Stemming from studies that asked owners for their top two reasons for selecting a hybrid, CNW believes it is not surprising in the current economic times that fuel economy ranks high on a list, collecting more than half of the votes.

However, CNW also learned distinctive styling has fallen to less than 15 percent as hybrids now come in all shapes, sizes and models “with only a nondescript badge to identify their roots.”

Spinella doesn’t foresee the situation changing anytime soon.

“Those who are now looking for Chevrolet Volt and Nissan LEAF as a new technological marvel have pretty much yawned their way out of the hybrid market,” Spinella declared.

“Barely 5 percent of respondents said that the new technology is a primary reason for making a hybrid acquisition,” he added. “And ecologists may still feel a kinship to the hybrid, but an ever-decreasing percentage says lower emissions are critical in their choice of a hybrid.”

CNW asserted there might be one other area of consumer appeal that might push hybrids sales — a position that this kind of unit “makes a statement about me.”

Still Spinella cautioned “that, however, has also shifted. Initially it was one of being an environmentalist in one fashion or another.

“But with the advent of hybrids now being touted as a performance enhancer, a growing percentage of hybrid buyers simply are selecting the dual-power models to add some right-foot power to their driving experience. Granted, it’s not a large percentage, but a growing one,” Spinella continued.

CNW wrapped up the discussion about these kinds of models by asking a straightforward question. How far can automakers push hybrids?

“As far as the government requires because it is becoming increasingly clear that a few automakers are offering the models only because it will help offset lower fuel economy variants that could hurt their CAFE numbers,” Spinalla suggested.

“Proof of this declining demand is the decreasing amount consumers are willing to spend for a hybrid,” he went on to say. “Once in the thousands of dollars, the premium has been cut into well under $1,000 and may soon require parity with single-powerplant models to move them off the lots.”