Dealers optimistic about 2011 sales surge

All those aging cars on the roads have been good for dealers’ service-and-parts business this year. Next year, vehicle sales will get a boost.

Morgan Stanley’s auto analysts are calling for light-vehicle sales of 14 million in 2011 after a survey of U.S. dealers. Those dealers report higher floor traffic, and more than half expect next year’s sales to jump more than 10 percent. Morgan Stanley’s industry outlook is more bullish than most.

A common factor cited in this and other reports: A current U.S. vehicle fleet that is more than 10 years old. Many drivers are getting to the point where they must replace their vehicles. Pent-up demand has been with us for a while. Dealers in Morgan Stanley’s survey said lack of credit availability and tight inventory were bigger headwinds this year than consumers’ willingness to pull the trigger on a purchase.

Morgan Stanley analysts already see inventories improving and anticipate better credit availability in 2011.

We’ve heard many retailers say that expanded credit for subprime customers will help. But that’s not the big difference the Morgan Stanley analysts are looking for. They say restoring loan-to-value ratios and down payments to historic averages for prime and near-prime customers will help more. Those average 85 percent and $4,500 today versus 93 percent and $2,500 before the crisis.

Closing that $2,000 spread could make all the difference for many customers come purchase time.

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