Pub. 11 2012-2013 Issue 4

N e w J e r s e y C o a l i t i o n O f A u t o m o t i v e R e t a i l e r s 29 new jersey auto retailer w w w . n j c a r . o r g spending levels. If growth were to really accelerate, the Fed could start to lift rates by the last months of 2014. Futures contracts in debt markets suggest that the financial markets do not currently expect any lift in rates during 2014, and the flat quarter for GDP growth at the end of 2012 also suggests that interest rates may stay at a low level during 2014. Watch the growth rate of the economy and measures of inflation carefully. And monitor the approach of Congress to reduce current Federal spending. Dealers Need to Capture Service and Parts Sales for More Cars That Are Six Years or Older, as the Older Cars on the Road Continue to Increase. The United States has a growing portion of vehicles that are more than six years old. At new car dealers, sales of new cars and used cars are on the increase. Be aware, however, that according to statistics in the 2009 National Household Travel Survey, the boom years of new car sales (2000-2007) managed to hold the share of vehicles on the road zero to five years of age constant in the 2001 measurement as compared to that of 1995. The federal government only does the Travel Survey every five or more years, so we do not have a more recent measure from that source. However, midway through 2012, R. L. Polk published the average age of cars, placing it at 11.1 years of age. The average age of light trucks was 10.4 years in the Polk data, with the blend of all light vehicles at 10.8 years. In 2009, Polk had placed the average age of all light vehicles at 10.8 years. All of these statistics suggest that flat dealership parts and service revenue sales are that much more of a concern as we look forward. The adoption of longer warranties to more than six years by many manufacturers would help solve this distressing trend for franchised new car dealers. For 2012, service and parts revenue for the typical dealership showed no growth andwas essentially flat in a year when overall dealership revenue grew nicely. Even during a slow recovery of the U.S. economy, growth in parts and service revenue should be evident. Franchised new car dealers around the country are looking for ways to become more competitive in service and parts for 2013 and beyond as they attempt to increase growth in these revenues. As the graphic below suggests, most of the recent growth of vehicles on the road is cars six or more years of age, and one solution for new car dealers is to capture more of the service and parts sales for these higher mileage cars and light trucks. Another important goal is to sell more new cars and light trucks this year and next year, providing more vehicles to service in the zero to two years of age category. Current low interest rates will help new car dealers do exactly that. Please make use of those low financing rates for your new and used car customers while they remain available. Paul Taylor is the Chief Economist at NADA. He can be reached at 800.252.6232. ONE MILLION  continued from page 27