Pub. 12 2013-2014 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 W I N T E R 2 0 1 4 20 new jersey auto retailer After hitting the recessionary low- point in 2009, the New Jersey new retail light vehicle market has been on a four-year winning streak. During that period, new vehicle registrationshave increased from 359,000 in 2009 to just over 487,000 in 2013, an increase of 36%, according to vehicle registration data provided by Polk. The ingredients that sparked the market are fairly easy to identify. Among themare low interest rates, pent-up demand fromseveral years ofwell belowaveragesales, arecord high average on-the-road vehicle fleet age, and limited supplies of used vehicles that helped boost trade-invalues. Considering this list of positive factors, the market had nowhere to go but up. We are now entering the fifth year of the automotive sales recovery, and concern is starting to mount that the rebound could be running out of steam. Registrations increased by single digit percentages in 2012 and 2013, and January of 2014 was not stellar. Indeed, our annual review of the key market determinants does indicate that the market could be approaching a cyclical peak within the next few years. Each of the key determinants is given a grade reflecting how the economic or automarket indicator is likely to impact sales. An “A” means that the indicator is pointing to strong sales, while an “F” means that the direction of sales should be decidedly negative. Following the report card is our overall consensus for the market. Economic Growth. Grade: B. Follow- ing the 2008/2009 recession, the economyhas grown, but at a very slow rate. As 2013 was coming to a close, many economists thought the economy was finally poised to take off, but indicators have beenmixed in early 2014. GDP should expand around 2.5% during 2014, which is sufficient to keep new vehicle sales at a decent level, but not high enough to ignite the market. Labor Market. Grade: B-. The un- employment rate has come down by several percentage points since 2009, and overall em- ployment has grown. But there are still too many New Jersey residents who would like to find work, but continue to have difficulty. These structural impediments holding back the return to full employment are the biggest deterrents restricting growth in new vehicle sales. Consumer Confidence. Grade: B. The slowly improving economy and mild improvement in employment have helped consumer confidence to an extent, but the improvement inhousing, the rising stockmar- ket, and ascending net worth have led many consumers to feel much better about current and future economic conditions. Consumer Affordability. Grade: A-. Relative to income levels, new vehicles are about as affordable as they have ever been. Low interest rates, respectable (if not excep- tional) growth in personal income, and the competitive new vehicle market (resulting in attractive incentives) are combining to make a new vehicle purchase a viable option for many consumers. Household Debt. Grade: B. Debt lev- els have come down a considerable amount during the past five years, and as result, debt servicepayments are eatingupamuch smaller chunk of household income, definitely good news. But many households will now need Rebound in New Jersey New Vehicle Market Predicted to Continue Pace of Recovery is Likely to Ease By Jeff Foltz