4% interest helps strong US auto sales

DETROIT (AP)

Americans found plenty of reasons to buy new cars in September, making auto sales a bright spot in the economy for yet another month. Total US sales rose 13 per cent from a year earlier to nearly 1.2 million. Analysts think sales could hit 14.3 million units this year, up from 12.8 million last year.

Low-interest loans are easy to get again, now that banks have loosened lending. New car loans carried an average interest rate of 4.05 per cent in September, the second-lowest rate after December 2011, according to Edmunds.com, which started collecting data in 2002. People with good credit can get a two per cent rate from a bank or credit union.

The cost of some models could fall further if automakers try to undercut each other in the small and midsize car markets, says Tom Libby, lead North American forecasting analyst for the Polk research firm.

"You have these couple of segments where there's brutal competition," Libby says.

New vehicles always pique buyers' interest and there are a lot of them hitting the US market now, including redesigned versions of big sellers like the Honda Accord, Nissan Altima and Ford Escape. Sales this year have also got a boost as Toyota and Honda re-entered the market after the Japanese earthquake in March 2011.

Many Americans have to buy a new car because their old one is on its last legs. The average age of a car or truck on US roads is approaching a record 11 years. Even people who buy new cars are keeping them for almost six years before getting rid of them, the longest time ever, Polk says.

Uncertainty about the economy is keeping sales from rising even faster. Some Americans 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 US presidential election, says Jeff Schuster, senior vice-president of Forecasting for LMC Auto-motive, an industry consulting firm.

But car companies remain optimistic about the rest of this year and the first part of next year.

"The positives outweigh the negatives," says Kurt McNeil, vice- president of US sales for GM. "We see continued slow, gradual growth for the entire industry and for us."

Auto sales peaked at 17 million in 2005 before hitting a 30-year low of 10.4 million during the recession in 2009

This year's strong sales could become a talking point in the presidential election. President Barack Obama often boasts on the campaign trail that the bailout of GM and Chrysler in 2009 helped save about one million jobs in the industry. Republican Mitt Romney has countered that the companies should have gone through bankruptcy with private funding and been allowed to recover with government-backed private loans.

Detroit's car companies have most of their factories in the Midwest, including Ohio, a key swing state.

Record-high gas prices played a role in sales last month, shifting buyers from trucks to smaller cars. Sales rose 40 per cent or more for the Chevrolet Cruze, Ford Focus, Toyota Corolla and other compacts. Gas prices have jumped 14 per cent since July 1 and hit US$3.79 per gallon at the end of September, a record for that time of year. Small cars now make up 23 per cent up new - car sales, up from 21 per cent in July, according to Ford's top US sales analyst Erich Merkle.

Toyota Motor Corp's sales rose 41.5 per cent and Honda Motor Co's were up 31 per cent in September compared with a year earlier, when their inventories were hurt by the earthquake. Honda sales of the Civic and Accord sedans rose 57 per cent. Nissan Motor Co, which recovered more quickly from the earthquake, says sales fell one per cent last month, partly because the company has just begun shipping its new Altima sedan to dealers.

Detroit didn't fare as well. Chrysler Group reported a 12 per cent increase, thanks to strong sales of the Dodge Avenger and the new Dodge Dart small car. But General Motors Co and Ford Motor Co sales were either up slightly or flat.

Ford saw a slowdown in sales of the Fusion sedan as it began shipping a new model to dealerships. The Fusion normally makes up 12 per cent of the company's monthly sales. Ford is also losing some customers who used to buy Ranger small pickups. Ford stopped selling the vehicle at the end of last year. Only about half of Ranger buyers are replacing their trucks with Ford products, Merkle says.

At GM, car sales increased 29 per cent, led by the Chevy Cruze compact. Sales of the Sonic subcompact were five times higher than last year. But sales of the Chevy Silverado pickup, GM's top-selling vehicle, fell almost 17 per cent.

Volkswagen AG sales rose 34 per cent, as sales of the Passat sedan nearly tripled over last year.

Hyundai Motor Co's sales climbed 15 per cent on strong demand for the Elantra small car, which was up 27 per cent.