Three years ago, U.S. car buyers started trickling back into showrooms after largely sitting out the recession. That trickle has turned into a flood.
From owners of revitalized small businesses that need to replace aging pickups to new hires who need a fresh set of wheels for the daily commute, increasingly confident buyers pushed auto sales back to pre-recession levels in the first six months of this year. Sales in the January-June period topped 7.8 million, their best first half since 2007, according to Autodata Corp. and Ward’s AutoInfoBank. Automakers reported June sales Tuesday. They rose 9 percent to 1.4 million.
The outlook for the rest of 2013 is just as strong. The factors boosting sales – low interest rates, wider credit availability, rising home construction and hot new vehicles – will be around for a while, and experts are hard-pressed for answers when asked what could slow things down.
“It all points to continuing improvement in the auto market,” said Mustafa Mohatarem, General Motors’ chief economist.
Analysts expect total sales of around 15.5 million cars and trucks in 2013, which would be 1 million more than in 2012. New cars and trucks sold at an annualized rate of 15.96 million in June, the fastest monthly pace since December 2007. From January to May, the pace averaged 15.2 million, according to Jessica Caldwell, a senior analyst at car buying site Edmunds.com.
Demand for big pickups has been the driving force. GM, Ford and Chrysler sold 157,480 full-size pickup trucks combined in June. That is up around 25 percent from the same month a year ago and almost double the number the companies sold in June 2009, a year when total sales sank to a 30-year low. GM said its new Chevrolet Silverado and GMC Sierra, which went on sale last month, are spending just 10 days on dealer lots before being sold. A 60-day stay is typical.
The pickup boom helps everyone, but especially the Detroit automakers, which sell the vast majority of trucks. And prices are rising as automakers add fancier features. Pickup trucks sold for an average $40,361 in June, up 2 percent from last year, according to Kelley Blue Book.
But trucks weren’t the only thing driving sales. Small and subcompact cars sales were also strong, possibly because young graduates went shopping for a new car, said Kelley Blue Book analyst Alec Gutierrez. Relatively high gas prices also may have steered some buyers to more fuel-efficient models, he said. Gas averaged $3.60 a gallon nationwide in June, or 10 cents more than a year ago.
Sales of Ford’s recently updated Fiesta subcompact more than doubled, while the Hyundai Elantra small car saw a 22-percent gain.
Family-haulers also did well to start the summer road trip season. Honda said sales of its Odyssey minivan jumped 26 percent. The Toyota RAV4 SUV was up 36 percent, while sales of the Jeep Grand Cherokee SUV rose 33 percent.
Consumer confidence hit a six-year high in June. And the Standard & Poor’s 500 index had its best first half since 1998, up 12.6 percent. Those measures correlate strongly to auto sales, since people have to feel optimistic and financially secure before buying a car.
At the same time, rates on auto loans remained near historic lows in June. The rate on a four-year new-car loan is averaging 2.7 percent.
Federal Reserve Chairman Ben Bernanke has pledged to keep short-term interest rates at record lows until the unemployment rate hits 6.5 percent, if not longer. The unemployment rate is currently 7.6 percent. Auto loan rates are pegged to short-term rates, so car buyers should enjoy low financing terms for a while longer.
Automakers can also keep rates low through their captive finance companies, Edmunds.com’s Caldwell said. She expects car companies to help keep rates low for a while, since raising them could hurt sales.