Auto sales animated by recovery, low interest, attractive new vehicles

auto salesMay was a very good month for auto sales.

GM, Chrysler and Toyota reported their best sales since before the start of the recession in 2008, while Ford Motor Company did them one better – or should we say three – with its best sales since May 2005.

Meanwhile, among European automakers, Audi and Porsche had their best sales month ever in the United States and BMW reported its best May results ever. Nissan also set a sales record for May and Hyundai Motor Co. recorded its best month ever, Reuters reported.

Industry sales totaled 1.6 million vehicles with a seasonally adjusted annualized selling rate (SAAR) of 16.8 million cars and light trucks, according to Autodata Corp. market research company.

The results “blew away” analysts’ expectations of 16.1 million SAAR, reported Business Insider.

GM’s May sales increase of 12.6 percent nearly doubled expectations despite recall issues and concerns about the amount of time it took the automaker to report some problems, demonstrating, ABC News reported, that “car buyers are willing to forget the past and look at the present and future for GM.”

Premium models along with small and mid-size crossovers led the way to higher-than-expected results.

“Nearly one-half of the new-model activity in 2014 will be premium vehicles, which is expected to create new competition for mainstream segments,” Jeff Schuster, senior vice president of forecasting at LMC Automotive, told Nelson Ireson at The Car Connection auto research website.

Ken Brauer, Kelley Blue Book senior analyst, cited sales strength among crossover vehicles.

“Supporting this increased appetite for more expensive, more premium vehicles is a trend toward longer loan terms in the automotive financing market,” Ireson wrote.

Experian Automotive reports the average loan term has reached a record high 66 months, while loans with terms of 73-84 months grew 27.6 percent in the first quarter of 2014, accounting for 24.9 percent of all new vehicle loans issued, according to Ireson’s Car Connection report.

“Credit conditions are making it easier to buy or lease a new car,” said Jessica Caldwell, Edmunds.com analyst. “Shoppers are opting for longer terms at lower interest rates. In other words, they’re able to afford more expensive cars by keeping their monthly payments at or near what they’re used to paying.”

The surge in auto sales the last three months has begun to make up for the slow start to the year because of severe weather in the U.S. North and East in January and February.

“It’s the continued recovery in the summer selling season,” Shuster of LMC told the Associated Press. “Kind of everything aligning in the month of May.”

Analysts expect June to bring more of the same because of low interest rates, good lease deals and attractive new vehicles.

– Mark Macesich

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