US auto sales stay strong in September

[October 03, 2012]  DETROIT (AP) -- Americans found plenty of reasons to buy new cars in September, making auto sales a bright spot in the economy for yet another month.

Total U.S. sales rose 13 percent from a year earlier to nearly 1.2 million. If they stayed at that pace, they'd reach 14.9 million this year. Sales rose for most carmakers, led by big gains at Toyota, Honda and Volkswagen.

Low interest rates, aging vehicles that need to be replaced and appealing new models are the main drivers of this year's consistently strong sales, says Jessica Caldwell, an analyst for the Edmunds.com automotive website.

"That's a good combination to get people shopping again,"Caldwell says. "That's really what sells cars."

Record-high gas prices shifted buyers away from trucks toward smaller cars. Sales rose 40 percent or more for the Chevrolet Cruze, Ford Focus, Toyota Corolla and other compacts. Gas prices have jumped 14 percent since July 1, and hit $3.79 per gallon at the end of September, a record for that time of year. Small cars now make up 23 percent up new-car sales, up from 21 percent in July, according to Ford's top U.S. sales analyst Erich Merkle.

Here are the factors that drew buyers to dealerships in September:

FINANCING. Low-interest loans are easy to get again, now that banks have loosened lending. New car loans carried an average interest rate of 4.05 percent in September, the second-lowest rate after December 2011, according to Edmunds.com, which started collecting data in 2002. People with good credit can get a 2-percent rate from a bank or credit union.

The cost of some models could fall further if automakers try to undercut each other in the small and midsize car markets, says Tom Libby, lead North American forecasting analyst for the Polk research firm.

"You have a these couple of segments where there's brutal competition," Libby says.

NEW MODELS. New vehicles always pique buyers' interest, and there are a lot of them hitting the market now, including redesigned versions of big sellers like the Honda Accord, Nissan Altima and Ford Escape. Sales this year have also gotten a boost as Toyota and Honda reentered the market after the Japanese earthquake.

Michael Silver, 67, was driving by a Mercedes-Benz dealership in Delray Beach, Fla., last month when he saw the newly redesigned 2013 E350. The retired principal fell in love with the styling and bought one on the spot after getting a good trade-in price for his Lexus.

"September is usually the worst time to buy a car, because the new models are out and the deals aren't good," he said. "But I just fell in love with it. It's the best car I've ever owned."

CONSUMER CONFIDENCE. Consumer confidence, one of the biggest factors influencing car-buying, jumped in September to the highest level since February. It was bolstered by a brighter outlook for overall business conditions and hiring.

Even though the economy has sputtered all year, auto sales have remained strong, and are expected to reach 14.3 million for the year. That's a healthy jump from the 12.8 million new cars and trucks sold in 2011.

AGING VEHICLES. Many Americans have to buy a new car because their old one is on its last legs. The average age of a car or truck on U.S. roads is approaching a record 11 years. Even people who buy new cars are keeping them for almost six years before getting rid of them, the longest time ever, Polk says.

"They're sick of looking at them," says Jack Nerad, editorial director of Kelley Blue Book. "A lot of them just become undrivable."

Uncertainty about the economy is keeping sales from rising even faster. Some Americans are holding back on major purchases until they see how the budget battle shakes out in Washington, whether Europe can fix its economy and who wins the U.S. presidential election, says Jeff Schuster, senior vice president of forecasting for LMC Automotive, an industry consulting firm.

But car companies remain optimistic about the rest of this year and the first part of next year.

"The positives outweigh the negatives," says Kurt McNeil, vice president of U.S. sales for GM. "We see continued slow, gradual growth for the entire industry and for us."

Strong sales could become a talking point in the presidential election. President Barack Obama often boasts on the campaign trail that the bailout of GM and Chrysler in 2009 helped save about 1 million jobs in the industry. Republican Mitt Romney has countered that the companies should have gone through bankruptcy with private funding and been allowed to recover with government-backed private loans.

Detroit's car companies have most of their factories in the Midwest, including Ohio, a key swing state.

Toyota Motor Corp.'s sales rose 41.5 percent and Honda Motor Co.'s were up 31 percent in September compared with a year earlier, when their inventories were hurt by the earthquake. Honda said sales of the Civic and Accord sedans rose 57 percent. Nissan Motor Co., which recovered more quickly from the earthquake, said its sales fell 1 percent, partly because the company has just begun shipping its new Altima sedan to dealers.

Detroit didn't fare as well. Chrysler Group reported a 12 percent increase, thanks to strong sales of the Dodge Avenger and the new Dodge Dart small car. But General Motors Co. and Ford Motor Co. sales were either up slightly or flat.

Ford saw a slowdown in sales of the Fusion sedan as it began shipping a new model to dealerships. The Fusion normally makes up 12 percent of the company's monthly sales. Ford is also losing some customers who used to buy Ranger small pickups. Ford it stopped selling the vehicle at the end of last year. Only about half of Ranger buyers are replacing their trucks with Ford products, Merkle says.

At GM, car sales increased 29 percent, led by the Chevy Cruze compact. Sales of the Sonic subcompact were five times higher than last year. But sales of the Chevy Silverado pickup, GM's top-selling vehicle, fell almost 17 percent. GM said that was due to a 55-percent decrease in sales to rental companies as the company shifts between 2012 and 2013 models.

Volkswagen AG said its sales rose 34 percent, as sales of the Passat sedan nearly tripled over last year. Discounts helped. Auto buying site TrueCar.com said Volkswagen had the biggest increase in incentive spending of any automaker, up 29 percent to an average of $2,462. Volkswagen is offering zero-percent interest deals on the Passat through October.

Hyundai Motor Co. said its sales climbed 15 percent on strong sales of cars like the Elantra small car, which was up 27 percent.

[Associated Press; By DEE-ANN DURBIN and TOM KRISHER]

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