The American Repossessor

SANTA BARBARA, Calif. — March sales have been an unexpected surprise for the auto industry, according to Matt Traylen, chief economist and client partner with ALG.

In addition to retail sales climbing, leasing levels are expected to come in above last year’s March level as well, he noted.

“March sales have been an unexpected boost to the industry in 2010, admittedly driven and started by Toyota in response to the recall, but the major players have also responded in kind, so sales are up to around 13.2 million SAAR in March, which is great,” Traylen told Auto Remarketing this week.

“Lease penetration is also going to be up over 2009, which is also good news,” he added.

Basically, while the majority of the auto industry has been negatively impacted by the recession, leasing also took a big hit.

“I don’t think there is a sector, apart from the repossession industry, that hasn’t been affected negatively by the ‘great recession,’” Traylen pointed out, continuing on to note that leasing levels have been impacted across the board.

“The precipitous slide in automotive sales — 16.1 million new sales in 2007 to 10.4 million in 2009, or around a 40 percent drop, has been huge. This is the lowest sales rate since the early 1980s,” he highlighted. “There has also been lower to almost non-existent domestic lease penetration from around 15 percent to almost zero percent over night at the end of 2008. Japanese companies didn’t fall very much, though, but luxury penetration dropped a bit.”

Traylen went on to explain, “A lot of this was caused in part by more stringent credit and borrowing standards. Remember when Chrysler was shut out of the leasing market by the capital markets in 2008, which refused to fund their lease business?”

However, there is a plus side to the recession, according to Traylen. With leasing down during the recession, lower volumes of vehicles are coming back into the used market which equals stronger wholesale prices.