Consumer confidence is sales wild card

Greater availability of credit -- along with pent-up demand and the potential for higher incentives -- should boost car sales in the next two months, says credit bureau TransUnion Corp.

The wild card is consumer confidence, said Peter Turek, automotive vice president in the financial services business unit for Chicago-based TransUnion.

"If consumer confidence can stay on an even keel, the next 60 days could shape up to be a good selling season," he said. "I think we're going to see more incentive spending ... and there's plenty of credit availability."

Credit is indeed loosening. Experian reports nonprime buyers accounted for 22 percent of the new-vehicles financed in the second quarter this year, up from 18 percent a year earlier. But U.S. consumer confidence is at its lowest level since April 2009, the New York research group Conference Board reported this week.

While their confidence may be shaken, consumers definitely are paying their bills, TransUnion said. TransUnion also reported last week that delinquencies on auto loans and leases were down for the seventh quarter in a row.

That's at least in part a statistical blip, Turek said. When loans and leases are on the rise, it stands to reason that times are better and fewer people pay their bills late out of a greater number of contracts. The opposite is true in a downturn. More people are late with payments and fewer people are taking out new loans and leases. Therefore, the percentage of delinquencies naturally rises.

Even allowing for that phenomenon, the data show that customers really are paying their bills more conscientiously, Turek said.

"Lenders tightened their lending standards in the recession. They put in new things like additional verification of income, better underwriting standards. The loans that are on the books are really good, and that continues to happen," he said.

Reuters reported last week that the Thompson Reuters/University of Michigan consumer sentiment index fell in August from July and that it was still consistent with recession-era lows.

"It's a delicate situation," Turek said. "Let's face it, if the stock market plunges 600 points and everybody starts hearing 'double-dip recession,' then consumers may pull back," he said.

Taking everything together -- especially the time of year, when automakers traditionally hike incentives to get rid of models from the expiring model year -- Turek said he expects sales to pick up. At the very least, he said, credit availability won't be a brake on sales.