Auto Outlook: No-interest loans trump gas prices to spur auto sales

By AL SWANSON, UPI Auto Writer  |  Sept. 9, 2012 at 5:30 AM
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For a lot of consumers a zero percent car loan beats out higher gasoline prices when it comes time to buy a new vehicle.

At summer's end, you might think auto showrooms would be virtually empty with fuel prices peaking near $4 a gallon in many places during the Labor Day weekend -- and way higher in some -- but you'd be wrong.

U.S. auto sales reached 1.28 million in August, the best in more than four years with consumers buying pickups and small SUVs as well as more fuel-efficient passenger cars to replace aging -- and less efficient -- vehicles.

The average mileage of all new vehicles sold in the United States last month was 23.8 mpg, up 0.2 mpg from July, the University of Michigan Transportation Research Institute said in a release.

By year's end, the North American assembly plants of all three Detroit car companies will have added shifts to crank out more cars and trucks. An analysis of North American auto plant capacity utilization conducted for The Detroit News found Ford will run its plants a 113 percent of capacity, GM at 108 percent and Chrysler at 104 percent -- based on the industry standard of two eight-hour shifts five days a week.

That means overnight and weekend shifts for autoworkers -- lots of overtime -- and a better return for companies that invested heavily in new equipment and tooling for popular new models.

The Federal Reserve said auto sales are expected to reach 14.2 million to 14.3 million vehicles this year, easing concerns of a sales slowdown during the second half of 2012. General Motors estimates industry sales of 14 million to 14.5 million this year because of pent-up demand.

The average passenger vehicle on U.S. roads is more than 11 years old.

Autodata reported a 19.9 percent jump in August vehicle sales compared to August 2011, to a seasonally adjusted annual rate of 14.52 million vehicles.

Chrysler led the Detroit Three with a 14.1 percent sales gain last month, followed by 12.6 percent at Ford and a 10.1 percent increase in sales at General Motors. Among foreign automakers, Honda sales rose 59.5 percent for the month from a year earlier when Japanese carmakers were still crippled by an earthquake and tsunami, followed by Volkswagen with sales up 48.2 percent, Toyota at 45.6 percent and Nissan with a 7.6 percent gain.

The industry's next challenge is to attract "I want" buyers instead of "I need" buyers.

"Small cars did well due to continuously high gas prices and full-size trucks did well," vice president of market intelligence Jesse Toprak told the Detroit Free Press.

Sales of the best-selling Ford F-150 pickup were up 19.3 percent with many buyers opting for V6 engines rather than less-fuel efficient V8s.

GM reported a 6 percent increase in sales of full-size pickups from a year ago, and 31 percent higher than July. GM had a 122-day supply of full-size trucks at the end of the month and wants to get inventory down to an 80- to 85-day supply of vehicles, the News said.

Sales of fuel-efficient Chevrolet Sonic, Cruze and plug-in hybrid Volt models set monthly records.

"Auto sales have been a bright spot for the economy all year long, and we see that trend continuing," Kurt McNeil, GM vice president of U.S. sales, told the News.

One popular sales incentive being offered to some buyers with excellent credit is the return of zero percent financing, which does not impact a manufacturers' profit margin like cash rebates or discounted financing does.

Toyota began offering zero percent loans on its flagship Camry sedan this month. Nearly 10 percent of all new vehicles were financed with a zero percent loan in August.

"This is the best of both worlds ... automakers can offer low interest-rate programs at little cost to themselves and consumers can take advantage of these offers and get a lot of car for their money," said Toprak.

Saab deal sealed, electric car expected in 2014

The first Saab-branded premium electric car could hit showrooms in about 18 months.

That's the timetable of National Electric Vehicle Sweden, the Hong Kong-owned company that purchased assets of Sweden's Saab out of bankruptcy earlier this year.

The performance all-electric cars will be called Saabs but will have a different logo than the iconic red, white, blue and gold-crowned griffin, Gas 2.0 said.

Best and worst cities for drivers

Survey says: Drivers in Sioux Falls, S.D., are the best in the United States, while Philadelphia motorists are the most likely to be in an accident.

The findings come in the eighth annual "Allstate America's Best Drivers Report," which looks at Census Bureau annual estimates of the population for 200 U.S. cities with more than 50,000 residents.

Based on the statistics, an average driver in Sioux Falls will be involved in a vehicle collision every 13.8 years. The national average is once a decade.

After Sioux Falls, the safest driving cities included Boise, Idaho; Fort Collins, Colo.; Madison, Wis.; Lincoln, Neb.; Huntsville, Ala.; Chandler, Ariz.; Reno, Nev.; Knoxville, Tenn. and Springfield, Mo.

The safest driving city with a population of more than 1 million was Phoenix. Indianapolis was the safest driving city with a population of 750,000 to 1 million residents.

"We want to recognize the city of Sioux Falls for being the safest driving city in America [for the fifth time in survey history], and whether you drive in a large city, small city or a rural area, we encourage all Americans to practice safe driving habits and good car safety," said Mike Roche, Allstate senior vice president of claims.

Allstate offers this advice to avoid accidents:

-- Allow plenty of time to reach your destination.

-- Know what's happening in the city during the time you're driving

-- Stay alert

-- Get directions to where you're going.

-- Watch the speed limit.

-- Look out for pedestrians, especially children.

-- Know the rules of the road.

-- Keep a safe distance -- especially around large vehicles.

"Minimizing distractions, obeying traffic laws and using your car's safety features like turn signals and headlights are all ways to be safer, no matter where you drive," Roche said.

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