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US auto sales surprise with strong showing in June

DETROIT--U.S. auto sales grew at the fastest pace in eight years in June, surprising the industry and setting it up for a strong second half of the year.

Sales rose 1.2 percent over last June to 1.4 million cars and trucks, according to Autodata Corp. GM, Toyota, Hyundai and Nissan all saw increases over last June. Honda sales were flat, while sales at Ford and Volkswagen were down.

June's annualized sales rate — which estimates annual sales if they stayed at the same pace every month — was 16.98 million. That was the fastest pace since July 2006 and higher even than May, which also surprised the industry with its strength.

Jesse Toprak, an auto analyst for the car buying site Cars.com, said buyers are out because of low interest rates, a strong stock market — which improves confidence — and great new vehicles. An easing in lending standards is also adding more potential buyers to the market.

“We're getting set up on a very good footing for the second half of the year,” Toprak said. “The last two months have exceeded expectations, which tells us that the consumer demand is very strong.”

Toprak said he may increase his annual sales forecast from 16.1 million vehicles to 16.3 million based on May and June sales. That compares with 15.6 million vehicles sold in the U.S. last year.

May sales were helped by five sunny weekends and the Memorial Day holiday, which got June off to a slow start. But Ford's U.S. sales chief John Felice said sales picked up at the end of last month as automakers started promoting Independence Day sales.

Analysts saw plenty to like in June. Forecasting firm LMC Automotive said automakers are carefully balancing production with demand, which has helped them maintain profits and cut back on big incentives that can eventually hurt resale values.

TrueCar estimated incentive spending rose 1.6 percent in June to an average of US$2,735 per vehicle. Both GM and Nissan lowered incentives by 12 percent from last June.

While incentives may be lower, buyers are taking advantage of good lease offers and low interest rates. The average interest rate for a 60-month new car loan is 3.18 percent. Three years ago, that was closer to 5.5 percent, according to Bankrate.com.

GM's sales were up 1 percent over last June despite a continuing parade of recalls. GM's total safety recalls for the year reached 29 million vehicles on Monday, when the automaker announced six new recalls of 8.4 million cars. Two of those recalls were for ignition switch problems, the same issue that began the company's recall crisis in February.

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New 2013 Ford Fusions are seen at an automobile dealership in Zelienople, Pennsylvania on May 8, 2013. The U.S. auto industry expects strong sales in the second half of 2014 on the heels of record sales for the month of June.

(AP)

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