Even though The Great Recession officially ended in June 2009, the car-buying public wasn’t really convinced until last year. In 2013, America’s perennial love affair with cars and trucks is definitely back on.
US new car sales rose last month to their highest level since the year before the recession began in December of 2007. There was a 17 percent gain in vehicles sold in August 2013 vs. August 2012, for a total of 1.5 million vehicles. If the trend continues, overall sales for 2013 will top out at over 16 million units.
Almost every major manufacturer experienced strong sales – domestic and international name plate. For instance, all four General Motors brands increased by double digits, including Cadillac’s 38 percent increase – its best sales since 1989. Ford did well, too, reporting its best month in seven years. Chrysler reported sales records for six of its models.
Sales were equally strong among Asian brands with Honda, Nissan and Hyundai reporting their best August sales ever. Toyota finished with the best August in five years. With a 45 percent increase, Subaru experienced its best month in history.
The European brands, whose sales have slumped on their home turf, did just fine in the US with BMW’s sales rising 45 percent. Mercedes-Benz rolled to a 20.5 percent increase and Audi was up 21.5 percent while Porsche set its all-time August record. Jaguar’s sales rose a whopping 67 percent.
Champagne corks popped on Wall Street as August sales numbers came in last week, driving Wednesday’s Dow Jones Industrial Average up by almost 100 points, so it’s fair to say that not only are car sales a symptom of an improving economy, but they’re also somewhat responsible for driving economic recovery.
Why are sales so strong? Many reasons. Unemployment is declining and job growth is steadily improving. People need cars to get to their new jobs. Pair that with the average age of passenger vehicles on the road is about 11 years, and you have a recipe for higher sales.
Interest rates are still very low. And while they have begun to rise, the cost of an auto loan isn’t enough to scare buyers. There are some good incentives available, too, particularly on various hybrid and electric vehicles. Manufacturers are eager to sell these cars to raise their overall fuel-efficiency ratings, aka Corporate Average Fuel Economy (CAFE), which are supposed to average 54.5 mpg by 2025. At the same time, continued high gasoline prices and rising consumer comfort with alternative-fuel models are having an effect, too. Both the Chevrolet Volt and the Nissan Leaf set monthly sales records in August.
Another, perhaps unexpected factor is that late-model used cars are still in short supply. Consumers are finding that their trade-ins are worth more and they can often buy or lease a new car for less than their current model, or they can get a more-expensive car with a lower monthly premium than they expected.
Leasing has also seen a rebound in popularity, accounting for more than a quarter of August’s new-vehicle purchases, according to Edmunds.com. It’s not just luxury models that are moving. Consumers are leasing mid-sized and even economy cars, attracted by easier credit and lower monthly payments: Edmunds reports that average monthly lease payments are $418 compared to loan payment of $464. Other factors include the desire to have a new car more frequently or to acquire the latest technology. New technology is being added to vehicles so often that what seems like whiz-bang stuff today may seem extremely common in just two or three years.
Should you be jumping on the new-car bandwagon? If you have an older car that’s costing you in repair bills, if you’re going to want to finance your car and are leery of rising interest rates, if you want better gas mileage than you’re getting now, it’s a great time to buy or lease you next new car!