(July 19, 2013) WESTLAKE VILLAGE, Calif. — New-vehicle sales are kicking off the second half of 2013 in very strong fashion, with new-vehicle retail sales in July expected to increase by 12 percent from a year ago, according to a monthly sales forecast developed jointly by the Power Information Network (PIN) from J.D. Power and LMC Automotive.

New-vehicle retail sales in July 2013 are projected to come in at 1,127,100 vehicles, a 12 percent increase from July 2012.  The seasonally adjusted annualized rate (SAAR) in July is expected to be 13.2 million units, nearly the same robust level exhibited in June 2013. Retail transactions are the most accurate measure of true underlying consumer demand for new vehicles.

PIN data shows that in the first half of 2013, new- and used-vehicle transaction prices have increased 3 percent.  In addition, there has been an increase in the utilization of longer-term vehicle loans and an increase in leasing, when compared with the same period a year ago.

The customer-facing transaction prices for new vehicles are averaging $28,824, and incentive spending per vehicle is averaging $2,847 in the first half of 2013. The average used-vehicle price is $18,751 in 2013.

"Elevated new vehicle transaction prices are being enabled by the availability of longer-term loans, affordable leases and strong used vehicle values, compounded by the availability of low interest rates," said John Humphrey, senior vice president of the global automotive practice at J.D. Power.

Loans of 72 months or longer are accounting for 30 percent of new-vehicle retail transactions in the first half of 2013, up from 29 percent in the first half of 2012. Additionally, leasing has increased to 24 percent in the first half of 2013, compared with 21 percent in the same period of 2012.

"The rise in new-vehicle leasing, where the typical lease term is just three years, is providing a counterbalance to the rise in extended-term financing, where a vehicle may be financed for 5 or 6 years," said Humphrey.

Total light-vehicle sales in July 2013 are expected to grow to 1,336,700, an 11 percent increase from July 2012. Fleet sales, which typically average between 15 and 16 percent of total sales in July, are expected to fall within the lower end of the average, with volume projected at 209,600 units.

LMC Automotive is raising its forecast for both retail and total light-vehicle sales in 2013. The outlook for total light-vehicles is now at 15.6 million units—previously 15.4 million units—while the retail light-vehicle sales forecast increases to 12.8 million units from 12.6 million units.

"The overall trend in vehicle demand has outshined economic growth, and looking forward, the improving economic fundamentals should hold demand at the current level, if not accelerate it over the next several months," said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "With a strong tailwind, it is not unreasonable to think about a 16-million-unit level of demand in 2013."