New car sales up, but speed slowing

New car sales continue to accelerate in San Diego County, but the pace of growth is slowing five years after the Great Recession.

The County New Car Dealers Association reports that in 2014’s first quarter, 33,952 new cars and light trucks were sold, a 6.7 percent jump over the same time period last year.

“Jobs are growing and that means more money,” said Alan Gin, economist at the University of San Diego. “Cars are one place that people put their money when their incomes increase.”

For the year, the association is projecting that 147,500 new cars will be driven off San Diego lots, beating last year’s 139,593 sales by 5.7 percent. The gain, while sizable, is slower than the 10 percent increase from 2012 to 2013, and far short of the 27.5 percent jump in sales from 2011 to 2012, as people capitalized on record-low interest rates amid pent-up demand post-recession. At the time, the average age for a car on the road was a record 11.2 years.

“When consumer confidence plunged it was problematic because people didn’t want to take on debt,” Gin said.

Still, new car sales have increased each year since they bottomed out at 77,707 in 2009, the year the Great Recession ended. But now, the association says San Diego could be hitting its cyclical sales cap. In 2007, before the worst of the recession, sales in San Diego were 136,137.

“Gradually improving economic conditions, the easing of the household debt burden, and most significantly, pent-up demand have provided the boost to new vehicle sales during the past four years,” the report says. “Although sales are likely to increase during the next year or two, the pace of the recovery is almost certain to ease.”

Nationwide, auto sales were up 1.6 percent in the first quarter, the association reports. Gin said San Diego is outpacing the nation for two reasons: it came out of the recession later due to the housing crisis, and a harsh winter probably hindered sales on the East Coast.

Based on March data, auto analyst Edmunds forecasts that 15.8 million new vehicles will be sold in 2014, up from about 15.6 million in 2013. In 2007, about 16.4 million new cars and light trucks sold nationwide, according to Wards Auto.

So far this year locally, Japanese brands have made up just more than half of the new car sales, at 51.6 percent of the transactions. The Detroit three — General Motors, Ford and Chrysler — have made up 15.5 percent of the sales.

Locally, the best-selling brand is Toyota, with 6,770 new registrations. Ford is in second place, with nearly 3,878 new cars sold, while Honda is a close third, with sales of 3,602 new cars.

While the new car market continues to grow, the used car market declined by 2.6 percent in the first quarter. The big culprit seems to be a lack of supply in five-year-old cars, since new car sales dropped drastically in 2009. In the first quarter, sales of five-year-old cars dropped 45.8 percent from this time last year.