U.S. Auto Purchases Likely to Moderate, According to a Recent TechnoMetrica Survey

A significant decline in the Auto Demand Index, a measure of consumers' purchase intent in the next six months, indicates that new vehicle sales will likely slow down over the coming months. The drop in purchase intent can be attributed to such factors as consumers' financial strains and persistently high gas prices.

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Ramsey, NJ (PRWEB) June 27, 2014

The share of the American car buying public that is planning to buy or lease cars in the near future has dropped by as much as 10%, according to the June reading of TechnoMetrica’s Auto Demand Index.

TechnoMetrica Market Intelligence, a New Jersey based research firm, developed the Auto Demand Index, a monthly survey of American adults from around the country, as a way to measure the purchase intent of consumers regarding their likelihood of buying or leasing a new vehicle within the next six months. The Auto Demand Index, or ADI, is based on responses to the question: How likely is it that you will buy or lease a new vehicle within the next 6 months?

After registering a sharp increase in May, the ADI declined by eight points in June, to a reading of 74. This sudden 10% drop from May is a strong signal that a decline in new auto sales will be seen in the near future.

This comes after an impressive performance by new vehicle sales in May, with sales increasing by 11% as consumers bought new vehicles at an annual rate of 16.8 million units. Analysts believe that this rise was due to such factors as increased economic optimism among consumers and improved weather conditions.

Measured against the long and short term tracking rates, June’s ADI level is five points below the 12-month moving average of 79, and two points under the 3-month average of 76. Several factors are responsible for this drop in purchase intent, including financial strains as a result of the unstable economy and struggling jobs market, along with the persistently rising price of gasoline. Looking ahead, current events in the Middle East are likely to further increase gas prices in the coming months, dampening car purchase intent even more.

As part of TechnoMetrica’s survey activity, the firm also records the number of Americans who said they would likely purchase a new vehicle within the next six months. This number is typically 14% of those polled, though in June it was just 12%, confirming the drop in overall demand.

Besides the Auto Demand Index, TechnoMetrica also conducts the Investor’s Business Daily/TIPP Economic Optimism Index, which is a monthly survey on consumer confidence. The Index grew nearly three points in June, posting a reading of 47.7 as compared to 45.8 in May. Although the Economic Optimism Index has now registered a reading in negative territory (below the neutral level of 50) for sixteen straight months, June’s Index level indicates that optimism concerning today’s economy may be starting to pick up among consumers. Whether this is the beginning of a trend or, as some analysts suggest, just a sigh of relief that the long winter months are behind us, remains to be seen.

“Although Americans are becoming more optimistic about the overall economy, consumers are still feeling the effects of a weak economy and struggling jobs market,” said Raghavan Mayur, president of TechnoMetrica. “Therefore, we expect that this economic situation, along with the high price of gas, will cause new vehicle sales to temper over the coming months.”

The Auto Demand Index survey also inquires into which vehicle brands prospective buyers are most likely to purchase. In June, Ford continued its reign as the most preferred brand among consumers, gaining two points for a share of 17%. Chevrolet remains in second place, with just over one in ten consumers (12%) saying they would likely buy a vehicle from this brand, while Toyota garnered 11% of likely buyers. Rounding out the top five were Nissan, with a 7% share, and GMC, whose share of likely buyers increased by three points, to 6%.

Regarding the types of vehicles consumers are likely to purchase, mid-size vehicles were the most popular choice, with one in five (20%) preferring this category. However, preference for mid-size cars declined by five points from the previous month’s reading. Small SUVs were chosen by 15% of likely buyers, while an equal percentage of consumers (13%) preferred compact vehicles, full-size cars, and large SUVs for their next vehicle purchase.

In terms of demographics, the 18-24 age bracket recorded the greatest increase in intention to acquire a new vehicle, as the index improved by 23 points from the previous month, to 122. Drivers earning less than $30k in income also registered a significant increase in purchase intent, growing 11 points to a score of 65. Meanwhile, purchase intent among black and Hispanic vehicle owners declined for the third straight month in June, dropping fifteen points for a score of 76. Purchase intent among those earning between $30k and $50k, as well as parents, also dropped sharply over the past three months.

Each month, TechnoMetrica uses Random Digit Dial telephone methodology to conduct live interviews with more than 900 respondents, using both landlines and cell phones. The margin of error for the survey is +/- 3.3 percentage points. Additionally, recent statistical analysis has shown a strong correlation between the Auto Demand Index and actual U.S. vehicle sales. The correlation is 0.76.


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