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- iHaveNet.com: Economy
by Danielle Kurtzleben
Analysts say pent-up demand has primed the pump for a banner year in auto sales
After years of putting it off, Americans are done waiting. They're ready to buy new cars, and even high gas prices aren't going to deter them.
Gas prices can take a heavy toll on auto sales, yet with costs moving toward $4 per gallon in the midst of a fragile recovery, consumers seem compelled by other forces.
"We don't have that knee-jerk reaction that consumers had in the past to gas prices. The reaction in March was a lot more subdued and not as dramatic," says Jesse Toprak, vice president of Industry Trends and Insights for TrueCar.com.
Instead, a confluence of other factors helped to push auto sales to healthier levels.
One was pent-up demand. According to Toprak, Americans put off buying cars during the recent recession and are now coming out to make up for it. That magnitude of delayed purchases could mean elevated auto sales for more than a month or two.
TrueCar estimates that "normal" annual car sales are around 15 million, Toprak explains. "So if you add up all those units that we didn't get to, that were below 15 million for the last several years, we have several more million units to go just to make up for it."
Added to that is a generally improving economy, with jobs and GDP posting stronger numbers in recent months. According to Robb Granado, analyst at financial information company Sageworks, strong growth throughout the auto supply chain suggests that something more than a temporary bump in demand is at work.
"The strong growth in sales we see shows that there's probably something more than just displacement from the downturn," says Granado. "It's potentially improved sentiment, and people are more comfortable making those purchases."
Gas prices are coming into play for consumers: rather than deterring potential buyers, they instead appear to be affecting buyers' choices.
One more promising trend also underlies the positive March sales numbers. Not only are Americans buying more cars -- they don't have to be coaxed into it. Even though the average transaction price for new cars was up by 6.9 percent in March over the previous year, incentives declined, by 1.8 percent.
For auto manufacturers, says Toprak, "selling more cars with less incentives, that's your ultimate goal. That shows that you're selling the product, that you're not selling the incentive."
The point may be that while Americans are spooked by high gas prices, they are now willing -- and financially able -- to make a longer-term investment to deal with volatility at the gas pump.
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Car Sales Soar Even as Gas Prices Do, Too