Depending on your source, consumer spending is either robust or rotten. While this uncertainty is scaring retailers heading into the important holiday shopping season, there is one sector where sales have soared to pre-recession levels.
Reports issued Friday show auto sales in October rose to the highest levels since the U.S. economy stalled, unemployment soared and consumers went on defensive mode. While the skies are still cloudy and problems exist, people in San Diego and across the country have decided it is time to get a new set of wheels.
“The government shutdown didn’t impact consumers’ growing appetite for buying new vehicles. The expectations were that car buyers would wait on the sidelines, but because of pent-up demand and credit availability, car sales increased from last month,” said Alex Gutierrez, senior analyst for Kelley Blue Book.
General Motors (NYSE: GM), the world’s largest car company, said sales in October totaled 226,402 vehicles, an increase of 21 percent from the same period a year earlier.
Ford Motor (NYSE: F) reported sales of 191,985 vehicles last month, the best October since 2004 and an increase of 14 percent from October 2012.
And Chrysler saw sales rise 11 percent last month to 140083 units, the best October since 2007. Sales have increased for 43 consecutive months.
Overall, it appears the industry will sell an estimated 15.7 million vehicles on an annualized basis. Sales have historically followed economic trends, peaking at 17.9 million units in 2000 and dropping to 9.5 million vehicles in 2009.
San Diego vehicle sales follow closely the national trends. According to the latest report from the San Diego New Car Dealers Association, sales through the end of September, the most recent reporting period, total 104,376 cars and light trucks. If sales continue at the current pace, they will top 140,000, making it the best year since 2006.
While fuel efficiency is a priority for new car buyers, they also seek out features they believe will make them safer on the roads.
“Consumers are drawn to the new models in the crossover segment, which feature increasingly efficient engines yet have more cargo space and a higher ride than their car counterparts,” Gutierrez said.
And, the fact the age of cars on the road today is at an all-time high proves there is a pent-up demand by consumers who have been waiting to buy a new car. A survey by R.L. Polk finds the average ago all light vehicles on the road today is 11.4 years, up from 10.9 years in 2010.
Another factor improving vehicles sales is financing. Unlike home loans where you either qualify or you don’t, auto dealers have the ability to structure a car loan based on the individual buyers’ credit situation. Zero-interest rates are available to buyers with high credit scores, while people with a poor credit history can still buy a car with a significantly higher interest rate.
Where auto sales go from here will be based on a number of factors. But, Kelley Blue Book summed it up best in its latest report: “Barring another economic setback, industry sales remain on track to reach about 15.7 million units in 2013.”