March Sales Hit Record Highs, But Fuel-Efficient Cars Come At A Premium

Like the U.S. economy, America's auto market is slowly, steadily recovering from the aftershocks of the Great Recession. New sales data from Kelley Blue Book suggests that March 2012 will see double-digit gains over March 2011 and will, in fact, be higher than any March on record since 2007.

In all, KBB expects March new-car sales to clock in around 1,425,000 units -- up 24% from last month and 14% higher than March 2011. In terms of the seasonally adjusted sales rate, or SAAR, that puts the U.S. auto market at around 14.6 million sales for the year. That's a bit lower than the 15.1 million SAAR seen in February, but KBB says that sales for that month were unusually high due to the warmer weather. 

Why does March matter? Because March is typically a big month for auto sales. At temperatures become more temperate, shoppers often get the urge to kick a few tires -- especially on new model-year rides they might not have seen before. And thanks to the tax refunds burning holes in some folks' pockets, they've got the financial wherewithal to seal the deal, too. So, like the crocus, March sales are often a harbinger of how strong (or weak) a year may be.

What to expect

KBB predicts that auto sales will continue to climb, thanks in part to the larger inventories on-hand at dealerships these days. In 2011, we saw shortages on many lots, often due to natural disasters that put crimps in the production lines of many Asian automakers. Significant headway has been made in Japan (crippled by the Tohoku earthquake and tsunami last March) and Thailand (ravaged by floods for nearly six months), meaning that popular models like the Toyota Prius are once again in ready supply.

However, shoppers looking for discounts and other incentives might find only disappointment. Soaring gas prices have resulted in huge demand for hybrids and smaller, fuel-efficient rides. In fact, a KBB survey of current car shoppers revealed that 51% are looking for a smaller, more fuel-efficient car, and 20% are checking out alt-fuel vehicles like hybrids and diesels.

As a result, sales of subcompacts like the Chevrolet Sonic, Ford Fiesta, and Honda Fit are in high demand. KBB expects March growth in that segment alone to come in 40% above March 2011. Given that demand, the waiting list for the all-new Prius C could be impressively long.

In terms of automakers, Volkswagen, Chrysler, and General Motors are seeing the most benefit from these improving sales. March will likely be a banner month for VW, with sales up 38.7% over last year. Chrysler will ring 34.7% more sales, and GM 24.1%. KBB doesn't explain the reason for those gains, but we know that VW has been pricing its models very competitively as of late. Chrysler and GM suffered from lagging sales following their restructurings in 2009, and from our perspective, it seems as if both are finally getting back up to speed.

Bottom line: if you're looking for a new ride and you're hoping to catch a bargain, you may not get your wish. On the upside, there should be enough supply of most models to keep you from waiting too long for your next set of wheels.