Car sales surge in early April despite higher prices

(April 16, 2010) SANTA MONICA, Calif. — A preliminary analysis of April car sales points to strong numbers through the first half of the month, even as average prices have increased.

The current pace this month suggests that the seasonally adjusted annual rate (SAAR) for car sales in 2011 could rise to 14.1 million new cars sold, according to a study by Edmunds.com. But Edmunds predicts a slowdown in the latter part of the month that will bring the April SAAR closer to the 13.1 million cars originally projected by Edmunds at the end of March.

"This quickened sales pace will likely settle, as it seems there has been a rush of consumers anticipating a shortage, and most of those sales are likely behind us," said Ray Zhou, senior analyst at Edmunds.com. "Inventories will soon get leaner, too, as production stoppages in Japan won't allow dealers to restock as quickly, and that may cause some consumers to delay their purchases."

Edmunds.com estimates that the average days to turn — or the number of days that cars sat on dealer lots before they were sold — fell more than 10 percent since the beginning of April, from 58 days to 52. These figures show that consumers are heeding Edmunds.com's advice to consumers to buy now before short supplies and more price hikes hit dealer lots this summer.

Edmunds.com still projects 12.9 million new car sales in 2011, based on the belief that any supply constraints will only push summer sales to later in the year when automaker production is expected to return to normal. But as the situation in Japan remains fluid and unpredictable, there are several possible scenarios that could further destabilize the market.

"Even a moderate impact on production for Japanese automakers that lasts through most of the summer could lower new car sales to 12.6 million, and a more severe impact could push sales down to as low as 12.2 million," said Edmunds.com Chief Economist Lacey Plache.

Another factor that is likely to affect sales: Edmunds.com found that the rising price of gas is contributing to overall increase in car prices, especially for smaller, more fuel-efficient cars. The average price of compact cars — which, according to Edmunds.com, have seen a boost in sales and purchase consideration as prices at the pump have shot up in the last few months — rose $230. Overall, car prices in the first week of April were $120 higher than in the first week of March.

Edmunds' AutoObserver.com offers in-depth analysis of April sales and the 2011 forecast.