Americans want new cars and trucks, and they're not letting higher gas prices or political dysfunction stand in their way.
Americans want new cars and trucks, and they’re not letting higher gas prices or political dysfunction stand in their way.
New car and truck sales were up 4 percent in February as rising home construction and cheap financing kept the U.S. auto recovery on track. While the pace of growth is slowing, industry analysts expect more gains in the coming months, saying there’s little that could derail demand for new cars.
Car buyers have already shrugged off higher Social Security taxes, which cut their take-home pay starting in January. Gas prices – which rose 36 cents to $3.78 per gallon in February – didn’t change their habits, either. And they ignored the debate over automatic spending cuts that were due to take effect Friday.
“Quite frankly, we think most of America is getting a little tired of hearing about some of the dysfunction,” said Kurt McNeil, General Motors Co.’s U.S. sales chief. “We think the fundamentals are strong and that’s what’s important, and that’s what’s driving the economy.”
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February sales hit an annualized rate of 15.4 million cars and trucks. That’s still short of the recent peak of close to 17 million in 2005, but it’s quite healthy compared with the anemic 10.4 million recorded during the recession in 2009.
The industry isn’t likely to see the double-digit monthly gains it saw last year, when Japanese automakers came roaring back after the 2011 earthquake in Japan. Instead, auto companies are settling in for a period of slower but sustained growth.
“All of the automakers are in good, strong positions, so it’s harder to get those share gains,” said Lacey Plache, chief economist with the auto buying site Edmunds.com.
Jeff Schuster, senior vice president of forecasting for LMC Automotive, a Detroit forecasting firm, raised his full-year sales forecast Friday from 15.1 million to 15.2 million. He said U.S. spending cuts could impact auto sales toward the end of the year, but he doesn’t expect that to happen.
“Beyond that or some other external shock, I think it’s full-speed ahead,” Schuster said.
Truck sales boomed in February as more new homes were built. McNeil said GM’s pickup sales to small businesses were up 40 percent from a year ago, which is a strong signal of confidence in the underlying economy.
“This is probably the beginning of the strong comeback of trucks that we’re going to see for the rest of year,” said Jesse Toprak, a senior industry analyst with the car buying site TrueCar.com.
To keep up that momentum, GM announced that it will offer free scheduled maintenance for two years or 24,000 miles on its full-size Chevrolet and GMC trucks. The offer runs through April.
GM’s sales rose 7 percent to their highest February level since 2008. Chevrolet Silverado pickup sales jumped 29 percent, which helped make up for faltering sales of cars like the Chevrolet Malibu and Cruze.
Ford Motor Co.’s sales increased 9 percent. Ford reported a 15-percent gain for its F-Series pickups, which are the best-selling vehicles in the U.S. The company also posted record February totals for the Escape SUV and Fusion sedan. Fusion sales were up 28 percent and Escape sales rose 29 percent.
Ford said it plans to increase North American production by 9 percent in the second quarter compared with the same period in 2012.
Toyota’s sales were up just over 4 percent, with strong sales of the RAV4 small SUV and Avalon large sedan. Tundra pickup sales also jumped 16 percent. Despite higher gas prices, sales of the Prius hybrid were down 13.5 percent.
Plache said buyers are getting used to paying nearly $4 per gallon at the pump. Gas prices have topped $3.90 per gallon in each of the past two years.
“People go right back to what they were buying before. They start buying big stuff again,” she said. Sales of the Ford Explorer midsize SUV, for example, were up 59 percent and nearly outsold the Prius.
Honda’s sales fell 2 percent. Sales of the new Accord jumped 35 percent, but that couldn’t offset big declines for the CR-V crossover and Civic small car.
Automakers spent less on discounts and deals, which cut into their profits and brand image. Discounts in February averaged $2,392 per vehicle, down almost 4 percent from a year ago, TrueCar said.
But low interest rates offset that. The average four-year auto loan has a 2.5 percent interest rate, according to Bankrate.com. That’s about half of what it was five or six years ago. On a $20,000 loan, that means a monthly payment of $438, down $23 from a 5 percent loan.
Geoff Pohanka, who runs 13 auto dealerships in the Virginia and Maryland suburbs around Washington, said he didn’t see any ill effects from the budget debate last month – even though he’s in an area that could be hit hard by government employee furloughs.
“I haven’t seen it yet,” he said. “We feel pretty good about the spring.”
Among other automakers reporting Friday:
– Chrysler Group’s sales were up 4 percent over a year ago, a much slower pace than the 21 percent jump it saw in 2012. CEO Sergio Marchionne has warned that first-quarter sales would decline because the company stopped making the Jeep Liberty midsize SUV as it prepares to build a replacement model. The new Jeep Cherokee is expected to hit showrooms in the summer. In the meantime, the Dodge Avenger and Charger sedans were strong sellers.
– Nissan Motor Co.’s sales were down 7 percent. Sales of the new Pathfinder SUV more than doubled, and sales of the Leaf electric car rose 37 percent after the company dropped the price. But sales of other cars and SUVs were down.
– Volkswagen AG’s sales were up 3 percent. Sales of the new Beetle nearly tripled.
– Hyundai Motor Co.’s sales were up 2 percent, led by a 64 percent increase for the new Santa Fe crossover.