For the U.S. auto industry, the recession is now clearly in the rear-view mirror.
New car sales jumped 17 percent to 1.5 million in August, their highest level in more than six years. Toyota, Ford, Nissan, Honda, Chrysler and General Motors all posted double-digit gains over last August.
The full-year sales pace rose above 16 million for the first time since November 2007, the month before the Great Recession officially started. Exuberant automakers said sales will likely remain at that pace for the rest of this year.
“I think it’s here to stay,” said Mustafa Mohatarem, GM’s chief economist.
U.S. car and truck sales totaled 16 million in 2007, then plummeted during the recession. They bottomed out at 10.4 million in 2009 and have been rising ever since. In August, they seemed to pick up speed. Mohatarem said he expects the year to end with sales closer to 15.8 million vehicles, which is higher than GM’s official forecast of 15.5 million.
August’s strong sales surprised analysts. Alec Gutierrez, an analyst with Kelley Blue Book, said sales unexpectedly spiked over Labor Day weekend after car companies unleashed a flurry of ads.
But even with the holiday marketing push, the trend still points to higher sales. More people are working as the economy improves, and they need cars to commute to their jobs. The cars on U.S. roads have reached a record 11.4 years old and need to be replaced. And low interest rates — now at 2.5 percent for a four-year car loan, according to Bankrate.com — are attracting buyers.
A lot of things have changed since 2007. In May of that year, the last time monthly sales topped 1.5 million, sales of small cars boomed as the nationwide average for gas topped $3 a gallon for the first time.
Back then, Inder Dosanjh, who owns Chevrolet, Volkswagen, Chrysler and Kia dealerships around the San Francisco Bay area, had fewer vehicles to sell, since U.S. automakers weren’t making competitive small cars. But last month, all of his dealerships saw 30 to 40 percent gains. His Chevrolet lineup now includes the Volt plug-in hybrid, Cruze compact, Sonic subcompact and Spark mini-car.
“We don’t have enough Sparks in stock,” he said.
Drivers have also learned to live with higher gas prices. Gas this August was the cheapest in three years, averaging $3.57 a gallon, compared with $3.69 last year. Toyota was even discounting the Prius gas-electric hybrid last month to woo buyers who are no longer so concerned about gas prices. The average Prius incentive was $1,462, more than triple the incentives from a year ago, according to TrueCar.com, an auto pricing website. The incentives worked. Prius sales were up almost 30 percent.
The market looks different in other ways. In 2007, pickup trucks made up 53 percent of U.S. sales. That fell to 47 percent in 2009, when construction ground to a halt. Now, truck sales are making a big comeback as contractors and other small businesses get back to work. From January through August, they made up 49 percent of total sales. Ford sold more than 70,000 F-Series pickups last month, the second month this year that sales have topped 70,000 for the nation’s top-selling vehicle.
People are paying far more for their cars than they did in 2007. Kelley Blue Book estimates the average price for a new car or truck in August was a near-record $31,657, up from $28,500 in 2007.
Carmakers are offering more options, like navigation systems, satellite radio and blind spot detection, and that’s driving up prices. Incentives are also down. Automakers closed plants during the recession and no longer need to offer expensive discounts to sell off excess inventory.
High trade-in values and low interest rates are also allowing automakers to offer attractive lease deals. Gutierrez said there are now more than 20 vehicles on the market that can be leased for less than $200 per month, including electric cars like the Nissan Leaf. The industry tracking firm Experian said earlier this week that nearly 28 percent of people who financed cars in the second quarter leased them, a record high. That’s up from 20 percent in 2007.
Christian Mayes, an auto analyst with Edward Jones in St. Louis, said consumers are figuring out that they can get a lot of car for the money due to low interest rates. Plus, newer vehicles are far more fuel-efficient than the ones they’re replacing, so buyers can apply the savings on gasoline to the monthly payment to get more options, he said.
Mayes doesn’t see the strong sales ending anytime soon. The auto sales recovery is broad-based, with work-truck, luxury and small-car buyers all starting to buy, he said.
Japanese automakers saw strong gains in August. Honda posted the biggest increase of all automakers, with sales up nearly 27 percent. Consumers bought a record number of CR-Vs last month, driving sales of the crossover SUV up 45 percent. Civic compact sales soared almost 60 percent.
Toyota had the second-biggest increase, at 23 percent, as Camry midsize car sales rose 22 percent to nearly 45,000. Nissan’s sales were up 22 percent while Subaru’s sales rose 45 percent to a best-ever 41,061.
Hyundai’s sales gained 8 percent and Kia’s rose 4 percent. The South Korean automakers have been struggling with low inventories this year.
Truck sales fueled Detroit’s results. GM sales were up almost 15 percent for the company’s best month since September of 2008. Chrysler and Ford each reported 12 percent gains.
Volkswagen’s sales fell 2 percent as buyers waited for a new Golf small car to arrive in showrooms.