The release of pent-up demand stimulated by improved consumer confidence pushed November’s new vehicle sales rate to 13.6M units; the highest rate recorded since August ’09’s cash-for-clunkers figure of 14.1M.

Overall sales grew by 14% relative to last November with light trucks maintaining a 54% share of total sales for the month.  November’s strong showing pushed light vehicle sales for the year to nearly 11.5M units and raised the consensus estimate for the full year to 12.8M.  The result will be that light vehicle sales in 2011 should beat last year by more than 10%.     

Although sales were primarily driven by demand and not through an increase in discounts. When breaking out incentives by cars and trucks the modest 1.8% average increase recorded by Autodata hides the fact that incentive spending was up 11.5% on light trucks while spending is down by 9.8% on passenger cars.  Incentive spending also increased on a sequential basis, jumping by just over 6% from October’s average.  That said, YTD spending remains down 8.2% for the market as a whole.

Light vehicle inventory moved up for the second month in a row in November, with the month end days’ supply growing to 61 days representing the first time since February that available supply has surpassed the industry standard of 60 days.

The bulk of the supply gain came courtesy of domestic OEMs – especially on the car side – with combined Chrysler, Ford, and GM supply increasing by five days to 79.  In fact, inventory for the popular Cruze model will be controlled through production cuts to keep supply and demand for the model in balance. This signals that GM, like other manufacturers, will maintain a reasonable supply demand balance to keep new vehicle transaction prices strong.

This is a good sign for used prices which, as expected, retreated again in November, however a month-over-month reduction in fleet supply and robust demand helped to slow the rate of erosion considerably from October’s pace.   Based on NADA’s calculations on a mileage and mix adjusted basis, prices for vehicles up to five years in age slid by less than half a percent from the prior month, which was a 2 point improvement over the transition from September to October.
Looking across vehicle classes, car prices actually increased by a slight .4%, while pickup, utility, and van prices declined by a maximum of 1%. 

On a year-over-year basis, mileage and mix adjusted wholesale prices for vehicles 1-to-5 years in age remained in positive territory at 4% with cars still maintaining a 7% advantage over last November’s prices while Utility vehicles and Vans are up about 5% and pickups up by 2%.  Annual compact car appreciation leads the segment pack at just over 12% even after a 15% decline from the high points in June. 

Used car prices in November, in particular compact and midsize cars, were mildly stronger than anticipated considering the exuberant appreciation witnessed earlier in the year.  Clearly November’s results were a product of brisk consumer demand – especially for later model year units – and the contraction in month-over-month fleet volume. 

From an Official Used Car Guide standpoint, although we anticipated the correction and stabilization of compact and mid-size car prices in the third and fourth quarters, we believed that the downward trend would take slightly longer and be more gradual than what actually played out. 

As a consequence of the market’s rapid descent, value adjustments for December’s edition were more aggressive than November’s market results would imply, and while this type of downward movement isn’t commonly seen in the Guide, we felt it necessary to bring car values quickly back in line with the market.

Looking ahead, we’re anticipating that used car and truck prices will remain relatively flat through the remainder of the month and into January.  Used vehicle demand indicators remain strong, which when viewed alongside an anticipated -8% reduction in year-over-year used supply supports the view that used prices will remain firm through the end of the quarter.