U.S. Car Sales Spurred by Cut-Rate Financing

Spurred by cut-rate financing programs, sales of U.S.-built cars rocketed 56.9% in early September and broke a 30-year record for the period, auto makers reported Friday.

Auto analysts said the recent sales surge, which began in late August, was due to the low-interest loan programs now being offered by most of the U.S. manufacturers on leftover 1985 models.

They cautioned, however, that the current sales pace was not a reflection of underlying demand and that sales are likely to drop off sharply when the programs expire.

“History tells us that most sales caused by incentives are borrowed from the future,” said Harvey Heinbach, an auto analyst with Merrill Lynch. However, he added, sales of this magnitude indicate that some “marginal” buyers are being lured into the market.

In an effort to counter lagging sales and clear dealer inventories to make room for 1986 models, General Motors started the current round of incentives last month by offering 7.7% financing on a number of its 1985 models. Ford, Chrysler and American Motors quickly followed with discount financing programs on most of their 1985 models. The programs are scheduled to end in October when the 1986 models are introduced.

The extensive use of sales incentive programs by the domestic auto makers has prompted analysts to predict that the companies will initiate incentives during the 1986 model year.

“We are beginning to see car sales controlled by incentive campaigns,” said Tom O’Grady, president of Integrated Automotive Resources, an industry research firm. The current round of incentives, he believes, is a “precursor to a lot of incentives, for a long period of time.”

The seven U.S. auto manufacturers sold 235,680 new cars in the Sept. 1-10 period, compared to 150,240 in the period last year. GM said its sales rose 58.8% in the period, while Ford and Chrysler both reported sales gains exceeding 60%.

The daily sales pace of 33,669 cars a day broke a record of 23,815 set in the same period in 1955.

Auto Sales

10-Day Sept. 1-10 Sept. 1-10 % 1985 1984 change GM 132,514 83,425 +58.8 Ford 63,674 39,328 +61.9 Chrysler 29,622 18,191 +62.8 AMC * 3,300 4,250 -22.3 VW U.S. 1,057 812 +30.2 Honda U.S. 3,831 4,234 -9.5 Nissan U.S. 1,682 -- -- TOTAL 235,680 150,240 +56.9

*Estimate