Pent-up demand, low interest rates help drive car sales

Joanne Allado was all smiles after she signed the papers to purchase her shiny brand-new black Nissan Sentra.

“It’s very easy to drive and I love how the exterior of the car looks sporty,” Allado said. “The mileage is great and it’s a practical car.”

Allado, 22, said that she was in dire need of a new car to get her to work and to school. Her previous car was more than 10 years old and she said it was falling a part. Although she did little research prior to purchasing a car, she kept an ideal budget in mind while browsing.

“I was looking for a car with good mileage because my school is across town from where I live,” Allado said. “I’m really looking forward to driving my new car. I wasn’t planning on purchasing a car today, but everyone was so friendly and everything just worked out.”

Nissan is not the only dealership sending customers out the door with a car purchase. Auto dealerships are reporting some of the strongest sales figures since the financial crisis. According to researcher Autodata Corp., car sales were up 12 percent and truck sales were up 15 percent in July compared to a year ago.

“We’ve had about a 12 percent increase. For the car business as a whole nationwide it’s about a 20 percent increase year over year. It has a lot to do with supply and demand,” said Nick Vosdoganis, general sales manager at United Nissan at 3025 E. Sahara Ave.

Autodata Corp. also found that in July all major automakers saw an increase in sales with the exception of Volkswagen, whose sales were off by 3.3 percent. The total light vehicle sales rose 14 percent compared to last month from a year ago.

General Motors, the nation’s largest auto company, took the lead with a reported 16 percent increase compared to last year with 234,071 vehicles sold.   Sales for Ford and Chrysler jumped 11 percent, while Japanese automakers Toyota and Honda reported a 17 percent or more increase.

Nissan also had a good summer. The company reported on its website that it had their best-ever June sales performance in the United States. June totaled 104,124, an increase of 12.9 percent over 92,237 units a year earlier.

Jessica Caldwell, senior analyst at Edmunds.com said that there are two major factors that have contributed to the increase of car sales: pent-up demand and low interest rates.

People who held on to their older vehicles through the Great Recession are finally replacing them this summer, which partially explains the thriving car business.

“What we saw in the recession between 2007 to 2008 was that people didn’t feel comfortable buying new cars,” Caldwell said. “Before the recession, people would trade in their cars every four to five years.”

Polk, the global automotive market intelligence firm, reports that the average age of all light vehicles on the road now stands at a record high of 11.4 years, based on review of over 247 million U.S. car and light truck registrations earlier this year.

Caldwell added that record low interest rates have also bolstered customer confidence. According to Bankrate.com, the average new-car loan rate for 48 months was 2.43 percent in late August.

The success of the auto industry can be measured through Seasonally Adjusted Annual Rate (SAAR), which is used to gauge how many cars are sold in the United States. According to Edmunds.com, an auto buying research website, in 2007 at the peak of the car business the SAAR level was a little more than 16 million vehicles annually. Auto sales skidded 41 percent from 15.72 million at the beginning of the recession in December 2007 to a low of 9.32 million in February 2009.

Now, the industry is powering its way to a comeback.

Jeff Giles, business development center manager at Findlay Honda, at 7494 W. Azure Drive, said that the local dealership has had around a 30 percent increase compared to last year.

“So far this year has been better for us. We’ve even added a few more employees,” Giles said. “July was the best month. Usually summertime is a good time, people tend to buy more.”

Vosdoganis said that United Nissan hired between 50 to 60 people since the recession.

“As the automotive business grows, the economy grows with it,” Vosdoganis said. “If you consider how many people are in this town and how many car dealerships there are, that in itself helps the economy. Sales people start to work a lot of hours and when they’re not working, they spend their money and in turn, all of that is put back into the economy.”

Michael McAllister, finance manager at Findlay Chevrolet at 6800 S. Torrey Pines Drive, said that although business is good, there are still some challenges.

“The challenge is that we’re is that some of our customers are financially burdened. So we had to find new ways to help them buy a car. We have programs in place for that. We refer them to different types of banks with different means of financing,” McAllister said.

Economic incentives continue to push customers toward smaller cars with improved gasoline mileage.

“Car sales are getting close to pre-recession levels,” Caldwell said. “We’re not quite there yet, but will we probably get there in the near future, possibly within the next few years.”

Contact reporter Sandy Lopez at slopez@reviewjournal.com or 702-383-4686.