New-vehicle sales are on fire in February, by almost all accounts. Now forecasters are recalculating -- and figuring on a bigger year than they expected just weeks ago.
The February selling rate is expected to hit 14 million units for a second straight month -- a surge that has prompted several analysts to boost their full-year forecasts for 2012.
J.D. Power and Associates expects February's seasonally adjusted annual rate of sales to be 14.0 million. TrueCar.com predicts a 14.3 million SAAR for the month, topping January's 14.2 million rate and up a million units from February 2011.
"This looks like the real deal," said TrueCar analyst Jesse Toprak.
Retail sales are driving the growth, said John Humphrey, Power's head of global automotive operations. He expects a retail SAAR of 12.0 million for the month, up from 11.0 million a year earlier, which would compensate for relatively lighter fleet volume.
"We're increasingly confident that the fundamentals are in place to support an upbeat outlook for the coming year," Humphrey said.
Carmakers and dealers are sounding buoyant, too.
"We're seeing some positive sales momentum in February," said Erich Merkle, Ford's chief sales analyst. "We're on a nice pace, a healthy sales increase over last year."
Many analysts are convinced that the market has shaken off its mid-2011 swoon and is in a sustained recovery from its 2009 low of 10.4 million unit sales. Indeed, February looks to be the sixth straight month with selling rates above 13 million.
Toprak forecast that February industry incentives would fall about $100 a unit from a year ago.
"We're selling the car, not the price," he said.
Since December, several independent forecasters have raised their 2012 outlooks.
Last week, IHS Automotive and Kelley Blue Book revised their forecasts to 13.6 million, up from 13.3 million. LMC Automotive, J.D. Power's forecasting partner, moved to 14.0 million from 13.8 million. TrueCar.com also moved to 14.0 million from 13.8 million, although Toprak said the change won't be official until after February sales are reported on Thursday, March 1.
Not everybody has changed since December. Morgan Stanley is sticking with its 2012 forecast of 14 million, said top analyst Adam Jonas. Polk is still at 13.7 million, although analyst Tom Libby said it will review that figure once February results are in.
Jeff Schuster, senior vice president of forecasting for LMC Automotive, said pent-up demand, greater credit availability and a rebound in leasing are helping boost auto sales this year.
"Overall, the economy is in a little better position," he said. "Two months is not a trend, but since September, we're seeing some [auto sales] consistency and we're easing back on the risk factors."
Toprak cited better economic fundamentals and pending 2012 introductions of "a slew of new products that give consumers the best choices they've ever had."
In addition, more leasing, low-interest car loans and greater lender competition for auto business are driving sales growth, he said.
Lenders have cut new-vehicle loan rates to the lowest level in at least four years. Experian Automotive reported last week. The research firm said the reason is that the cost of money is low and fewer car buyers are delinquent. The average interest rate for a new-vehicle loan fell to 4.52 percent in the fourth quarter from 4.84 percent a year earlier.
Despite adding 300,000 units to its 2012 forecast, IHS Automotive is carefully monitoring rising fuel prices and the potential for the European debt crisis to affect U.S. sales, said analyst Chris Hopson.
"Gasoline prices could hit a tipping point that would affect auto sales volume and not just the mix," he said.
The five publicly traded dealership groups that have reported fourth-quarter financial results in recent weeks all cite robust sales so far in 2012.
"It feels like things are loosening up," said Lithia Motors COO Bryan DeBoer last week. "Through the first half of February things are looking pretty solid."