U.S. Car Sales Leap 27.6% as Buyers Rush for Tax Break

A rush by buyers seeking a last-minute tax break in mid-December propelled domestic car sales by the eight U.S. auto makers to 27.6% above the corresponding period last year, the companies said Monday.

The auto makers sold 210,654 cars between Dec. 11 and 20, compared to 165,132 in the year-ago period. Year-end sales reports will be released today.

Mid-December sales by Ford Motor, the nation’s second-largest auto maker, rose sharply to 65.6% above the year-ago period. Sales by General Motors, the largest auto maker, were up 11.5%, and sales by third-ranked Chrysler rose by 23.2%.

“I think what we’re looking at is a rush to buy cars before the end of the year to take advantage of the expiring sales tax break,” said David Healy, automotive analyst with the New York brokerage house Drexel Burnham Lambert.

A law that went into effect Jan. 1 removes the deduction for state and city sales tax from federal income tax returns. The high sales tax on expensive cars made the deduction a significant savings for buyers.

Healy said sales likely remained high in late December but will slump in January.

“Dividing up the company’s numbers, GM continued to decline in market share, and Ford seems to have taken up most of the slack,” Healy said. “That drop in market share that began showing up when GM ended its incentive programs back in October seems to be continuing.”

GM’s sales accounted for 50.3% of all domestic sales, down from 57.6% a year earlier. Ford’s share was 29.7%, up from 22.9%, and Chrysler’s share was 13.6%, down from 14.1%.

Ford’s share increased in part because its dealers had sufficient inventory of popular models, compared to shortages earlier in the year, Healy said.

“I doubt Ford is going to maintain 30% of domestic sales here,” he said. “I think that is a little too rich, but it is an impressive performance.”

Adjusted for seasonal fluctuations, cars sold at an annualized rate of 8.8 million vehicles, compared to 6.9 million vehicles a year earlier. Car sales this year through Dec. 20 totaled 7,943,056 vehicles, down 0.4% from the corresponding period last year.

Auto Sales

Dec. 11-20 Dec. 11-20 % 10-Day 1986 1985 change GM 105,963 95.049 +11.5 Ford 62,558 37,767 +65.6 Chrysler 28,591 23,216 +23.2 Honda U.S. 7,302 3,520 +107.4 AMC* 1,110 1,750 -36.6 VW U.S.* 1,465 2,015 -27.3 Nissan U.S. 2,732 1,815 +50.5 Toyota U.S. 933 -- -- TOTAL 210,654 165,132 +27.6

*Estimate