AP News

Ahead of the Bell: Auto sales remain strong


DETROIT (AP) — Interest rates are low, trade-in values are high, and carmakers are rolling out attractive new models in key areas.

All of these factors combined to keep auto sales strong in September. Most analysts predict an annual sales rate of about 14.5 million new cars and trucks for the month. That's about the same as August, which was the strongest month of the year.

Automakers report U.S. sales figures throughout the day on Tuesday.

Sales would be even stronger were it not for uncertainty about the broader economy. Some people 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, said Jeff Schuster, senior vice president of forecasting for LMC Automotive, an industry consulting firm.

Schuster still expects annual sales to reach around 14.3 million for the full year, 1.5 million better than last year. Bargain interest rates are largely fueling sales, he said. Some banks and credit unions offer 2 percent financing to people with good credit. That's almost as good as subsidized loans from the automakers' finance companies.

"Not only is it cheap, it's relatively available," Schuster said. "There's no question that's driving buyers."

Also, used-car values have remained high due to tight supplies and strong demand, and that means dealers are paying more for trade-ins.

And there are a bunch of new models coming out, especially in the midsize car category, the most popular segment of the U.S. market. Honda's new Accord and a new Ford Fusion are just hitting showrooms, as is a revamped Chevrolet Malibu. The redesigned Nissan Altima is selling well. A new Toyota Camry, the top-selling car in America, has been in showrooms for only a year.

The new models have ready buyers. People are replacing aging cars they held onto during the 2007-2009 recession, and that's been helping sales all year. The average age of cars and trucks on U.S. roads is near 11 years.

One thing that will be absent from September sales is big discounts from automakers. The average incentive for the month was $2,468, down almost 7 percent from September of last year, according to the TrueCar.com auto pricing site.

Even with uncertainty, there's enough good economic news to help sales, which could reach an annual rate of 15 million this month, according to Morgan Stanley analyst Adam Jonas. If sales hit the 15 million pace, it would be the highest since March of 2008, before the financial industry meltdown.

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.

Checks with dealers found higher floor traffic in mid-month "driven by aggressive lending and marketing activity, particularly for trucks," Jonas wrote in a note to investors.

Sales of 15 million would still fall short of the recent peak of around 17 million in 2005. They bottomed at a 30-year low of 10.4 million during the recession in 2009.


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