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New car orders surge in September

The Australian Fleet Lessors Association(AFLA) announced a rise in the number of vehicle forward orders from its members, flagging growing vendor sentiment about car sales.

There was great concern earlier for the vehicle leasing industry, brought on by the previous Labor government’s proposal to alter the Fringe Benefit Tax (FBT), which would have decreased the incentives for leasing a vehicle by companies and government organisations.

When the proposal was announced in July, new car sales dropped from a upward trend in total numbers reported by the Australian Bureau of Statistics for August. McMillan Shakespeare (ASX: MMS), which provides fleet management and salary packaging services, and major automotive dealership companies AP Eagers (ASX: APE) and Automotive Holdings Group (ASX: AHE) all announced that the legislation would adversely affect car leasing and sales in general, and urged the previous government to scrap the proposal.

Now, the new forward orders data was reported to show a surge in the last two weeks of September, just after the federal election. About 5,000 orders were placed, and according to the AFLA, a regular one-month total is around 9,000, so a definite change in mood for leasing is clear.

In September, total new car sales was reported by the Australian Bureau of Statistics (ABS) for the month of August was 94,569. Compared to August 2012, sales figures were up a seasonally adjusted 0.2%, so although the AFLA news is welcomed, car sales in general are still below their 97,621 seasonally adjusted high in December 2012. These forward orders will gradually appear in the new car sales figures since delivery will be spread out over the coming months.

Other companies to benefit from an upturn in car sales are car parts and accessories retailers are ARB Corporation (ASX: ARP), known for its specialty 4WD items, and Super Retail Group (ASX: SUL) which operates Supercheap Auto. More cars on the road means more sales for car maintenance, upgrading and personalisation.

Foolish takeaway

In addition to regular business trends that make a company’s profits rise and fall, government regulations and legislation can play a vital role in encouraging business, or they can upset industries and cause uncertainty.

For investors, though, the share price of a good company could come down for a short while, giving them an opportunity to buy a good stock at a discount price. Once the trouble has passed, market sentiment improves and you got a bargain.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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