U.S. car buyers bought new cars and trucks at the fastest pace in nearly a decade last month, data released by automakers Tuesday showed. General Motors, Fiat Chrysler and Honda reported increases while Toyota, Nissan and Ford saw declines.
Americans bought about 1.63 million new vehicles in May, up 1.6 percent from about 1.61 million in the same month last year, according to automotive statistics provider Motor Intelligence. Industry forecasts had expected a modest 1 percent decline in sales, to 1.59 million, in part because May was one sales-day shorter than it was last year.
“The buying behavior is supported by a combination of low interest rates, consumer confidence, the impact of lower fuel costs on discretionary income and, in some cases, fresh product,” Stephanie Brinley, senior analyst at IHS Automotive, said in a statement.
May’s seasonally adjusted annualized rate -- a key monthly metric that gauges sales over 12 months -- rocketed past the 17.3 million forecast to hit nearly 17.8 million, its highest rate since mid 2005 and much higher than last May’s 16.7 million.
IHS and others maintained a 2015 annual sales forecast of 16.9 million, which would be the highest since 2005. May’s numbers suggest that target will be hit easily, if not surpassed, making it the sixth-consecutive year of new-auto sales growth since 2009 when the Great Recession knocked sales to a 30-year low of 10.4 million.
Industry watchers are waiting for the tide to turn amid one of the longest periods of auto sales growth in history. Most say this likely will begin after the U.S. Federal Reserve starts increasing interest rates, which has kept auto financing costs low and has encouraged consumers to take out much longer loan terms.
"Car buyers continue to pay more for vehicles and mitigate that cost with longer loan terms and low interest rates,” Jessica Caldwell, director of industry analysis for car shopping platform Edmunds.com, said in a statement.
The average new vehicle loan term was a record 67.9 months in May, Edmunds.com reported. The average new vehicle loan APR fell to 4.6 percent in May from 4.8 percent in April. About 9 percent of buyers received zero-percent financing, the highest percentage since September.
Owing largely to a shift from sedans to costlier SUVs, the average transaction price for a new vehicle sold in May was $33,363, up 4.3 percent from last year, Kelley Blue Book said.
So when can we expect this long growth cycle to begin winding down?
“We’re likely to hit that limit in six to 12 months, maybe 18 months,” Alec Gutierrez, senior market analyst for Kelley Blue Book, said in a conference call.
Fiat Chrysler Automobiles was a big winner last month on the back of strong demand for Jeep SUVs and the recently released Chrysler 200 sedan. FCA sales rose 4 percent compared to the same month last year. GM was supported by its strong lineup in trucks and SUVs with sales up 3 percent. Ford Motor sales dropped 1.3 percent as it played catch-up on production of its new aluminum-body F-150 pickup truck.
The Volkswagen brand enjoyed an unusual monthly gain of 8 percent thanks to an uptick in demand for its Touareg and Tiguan SUVs. Honda sales rose 1.3 percent, boosted by an 11 percent jump in truck and SUV sales. Toyota and Nissan sales dropped 0.3 percent and 0.9 percent.