New car buyers, shunned by lenders just four years ago, now are benefiting from historically low interest rates and more-available credit, pacing a U.S. auto market that is hovering near pre-recession levels.
General Motors Co. and AutoNation Inc., respectively the top-selling automaker and dealership group in the U.S., are among companies pointing to ample financing for new car and truck purchases pushing sales comfortably past 15 million this year, the highest since 2007.
“We have the best financing available for our customers ever,” Mike Jackson, the chief executive officer of Fort Lauderdale, Florida-based AutoNation, told a J.D. Power & Associates conference this month in Orlando, Florida. “I go back to ’08 and ’09, and I couldn’t get the Lord Above financed.”
U.S. light-vehicle sales probably climbed 3.7% in February to 1.19 million, the average estimate of 10 analysts in a Bloomberg survey. The annualized industry sales rate, which is adjusted for seasonal trends, may have matched January’s pace of 15.3 million, the average of 15 analysts’ estimates.
“No industry has benefited more from the unfreezing of the credit markets than new and used vehicles,” Tom Webb, chief economist of Manheim Consulting, said this month in a report. “Although the immediate goal of Federal Reserve actions was to lower long-term rates and support the mortgage market, it was auto-financing markets that enjoyed the first boosts.”
GM, whose former finance unit needed a bailout because of losses on subprime home mortgages, saw “a number of lenders” completely exit auto leasing during the recession, said Kurt McNeil, vice president of U.S. sales operations. The Detroit- based automaker is now building General Motors Financial Co. and has seen lenders including Ally Financial Inc., the former GM unit, and Wells Fargo & Co., expand their offerings to its dealers and customers.
“The availability of consumer credit is plentiful,” McNeil said this month in an interview at a National Automobile Dealers Association convention in Orlando. “More lenders are interested in getting back into various elements of our business. That just fuels opportunity.”
The percentage of new-vehicle sales that were leases has exceeded 20 percent since the beginning of 2010 and has reached about 25% the past three months, Kevin Tynan, a senior analyst at Bloomberg Industries, said in a Feb. 25 report.
Banks reported the most common rate for a 48-month new-car loan was 4.82% in November, the most-recent reporting period. The rates have dropped from more than 7% before the Fed lowered its target interest rate to zero in December 2008 and began large-scale asset purchases to boost growth.