How Auto Sales Have Climbed This Year
Updated October 14, 2013
Drive past any car dealer lot these days and you’ll probably see signs advertising low rates, rock bottom prices and “attractive financing” options. Seeing how dealers seem almost desperate to get rid of their inventory, you might think that sales or down – or on the flip side, that cars are flying off the lot.
And, perhaps thanks to all of the incentives (and the fact that carmakers and dealers will use almost any holiday as an excuse to offer special deals, discounts and incentives) the latter is actually the case. May and June of 2012 actually showed an increase in new car sales over 2011; overall it’s good news for buyers, sellers, carmakers and the economy as a whole.
In May 2012, more than 1.3 million new vehicles were sold in the U.S, an increase of more than 25 percent over sales in the same month of 2011. May 2011 was the beginning of the auto sales collapse, especially for Japanese automakers and it wasn’t until the spring of 2012 that sales started picking up pace. GM led the way to recovery, with more than 300,000 vehicles sold in May alone.
The upturn continued into June, with around 600,000 cars sold, an increase of 11 percent over 2011. The overall number of cars sold is lower, largely attributable to Memorial Day sales events and dealer incentives in the previous month. The increase in new car sales is also attributed to the Federal Reserve’s reluctance to raise interest rates, meaning that buyers can get car loans at low rates, making a new car purchase affordable (and therefore attractive).
Benefits for Carmakers
The benefits of increased sales to automakers are fairly obvious: more sales means more profits, means the ability to stay in business. In some cases, it means also the ability to rebuild after the economic failures of a few years ago. For example, Chrysler led new car sales in June, showing the greatest gains since 2007, when gas prices began to rise and the economy went south. Increasing sales numbers are allowing Chrysler to stay viable.
And car sales are expected to stay strong, meaning good news for automakers. Since the Great Recession began in 2007, demand for new cars has been at abysmally low levels. Now, consumers are cautiously returning to lots, looking for new and reliable vehicles that get great gas mileage. The fact that many buyers haven’t purchased a new car in five years or longer means that there is a lot of pent-up demand for new cars – a distinct benefit to automakers and dealers.
Benefits for Buyers
One of the silver linings to the Great Recession has been that many automakers have gotten back to basics with their vehicle offerings, making smaller and more fuel efficient and economical cars. No longer can the average American family afford a gas-guzzling SUV that costs over $100 to fill up. At the same time, buyers are demanding more from their vehicles in terms of features and carmakers have responded by making many features standard. Or, they throw them in as a bonus. Consumers are demanding entertainment system upgrades, navigation systems, enhanced safety features. Competition among the carmakers for scarce car buying dollars has made these features more accessible to the public, as a whole.
Benefits to the Economy
The strong auto sales numbers for June 2012 were a surprise to economists, who predicted weak numbers, especially given the waning job market and decreasing consumer confidence. In the past, when auto sales are up, it has indicated that the economy is improving or doing well; sometimes economists use the health of the auto sales industry as a gauge of the health of the overall economy. However, this year, there are many conflicting signs; the job market is down while housing and autos are showing some improvement – so economists are cautiously optimistic about an overall improvement. Most agree, though, that the increase in car sales is a good sign. Consumers tend to be attracted by incentives and special events.
Whether or not the gains that car sales made in May and June are indicator of things to come remains to be seen, but there is no denying that the above average performance is a boon to carmakers, as well as consumers and the economy.
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