Despite concerns about the current condition of the U.S. economy, low-interest financing helped bolster auto sales in July.
Analyst Joseph Spak of Canadian-based RBC Capital Markets said, “We are hopeful that factors such as pent-up demand and easier, available credit can overcome the risk of a softer U.S. economy.”
Although consumer confidence rose slightly this month, it remained at a historically low level. Light vehicle sales in July are expected to reach 14 million units, down from 14.1 million units in June according to a recent Reuters survey. Most major automakers will release their July sales figures tomorrow.
During the first quarter, auto loans to consumers with credit scores below 680 increased 18.2 percent year-to-year, and accounted for 23 percent of all vehicle loans according to Experian Automotive.
Most auto industry analysts expect sales to increase during the second half of the year as automakers roll out their 2013 models and begin offering incentives on their 2012 inventory. A number of forecasters, including RBC Capital Markets and LMC Automotive, expect to see annual sales reach around 14.5 million units.
Sales of Japanese autos are expected to account for a healthy percent of the overall sales compared with a year ago, when Toyota, Honda and Nissan were struggling with inventory shortages caused by the March 11 Japan earthquake and tsunami.
In addition to the easing of credit, pent up demand and an upswing in construction spending are seen as contributing factors behind the sales numbers. Although many consumers took advantage of the federal CARS program, better known as Cash for Clunkers, to trade in their aging autos in 2009, the average vehicle on U.S. roads is currently more than 10 years old.
In something of a reality check, CNW Research of Brandon, Oregon points out that the U.S. auto industry is “far from the healthy, robust athlete” it was prior to the economic meltdown of 2008. Between 1998 and 2007, annual light vehicle sales in the U.S. averaged 16.7 million units.
According to a recent CNW memo, “The key holdback among consumers remains having well-paying jobs and solid confidence in the economy. Today, the industry is feeding off of those who need a car, not want one.”