Intelligencer Journal/Lancaster New Era

Best January in 5 years for automakers
BY TOM KRISHER, and DEE-ANN DURBIN, Associated Press

DETROIT -- American consumers ignored tax increases and trudged through winter weather to buy new cars and trucks at an unusually strong pace last month.

"(January) was like a sprinter out of the starting blocks," said Mike Jackson, CEO of AutoNation Inc., the country's largest auto dealership chain.

Analysts said it likely will be the best January in five years once all automakers report sales. Toyota posted a 27 percent increase, while Ford sales jumped 22 percent. GM and Chrysler both reported 16 percent gains compared with a year earlier.

The results left the industry optimistic about the new year. Businesses bought more trucks. Consumers are ready to buy -- their cars have reached a record average of 11.3 years old -- and banks are making it easier with low interest rates and looser credit terms.

The stock market also may have inspired car buyers. The Standard & Poor's 500 index had its strongest January since 1997, and new-car purchases tend to rise or fall with the market. And employers have been hiring at a steady -- if not spectacular -- pace.

"We're in a fundamentally sound trajectory," said Mustafa Mohatarem, chief economist for GM. He said the recovery from the Great Recession in 2008 is still modest, but "those recoveries tend to be much more sustainable."

Whatever the incentive, people didn't let chilly weather, or the heavier hand of the U.S. Treasury, stop them from car shopping.

Chrysler estimated that total U.S. industry sales hit an annual rate of 15.5 million in January. If that holds for the rest of the year, automakers will sell 1 million more vehicles than in 2012, when sales rose 13 percent.

The strong January numbers came even though higher taxes reduced take-home pay for most Americans. Taxes rose after a 2-percent reduction in Social Security taxes that was in place for two years expired Jan. 1.

January sales might have been even higher without the tax increase, said Jesse Toprak, vice president of industry analysts at the car pricing site TrueCar.com. He said the increase is costing the average new car buyer -- those with a household income between $70,000 and $100,000 per year -- around $300 per month.

"That's almost a car payment," he said.

Analyst forecasts for 2013 are in the 15 million to 15.5 million range. Although still far from the peak of about 17 million in 2005, the industry could sell a whopping 5 million more cars and trucks than it did in 2009, the worst year in three decades.