US automobile industry recovers, boosted by leases

Ford Motor Co., Chrysler Group and Nissan Motor Co. reported U.S. sale gains for July as the industry’s continued recovery.

Chrysler has surprised by its US sales, which saw a 10% jump, both bettering the industry average of 8% and improving over the same stretch of 2012. Ford Motor Companys U.S. sales for July increased 11% compared with a year ago, for the best total July monthly sales since 2006. Nissan missed seven analysts’ average estimate of 13% posting 11% advance.

Used car higher than expected prices, low interest rates and tendency to buy vehicles based on leasing agreements are placing the US automobile industry back on track for its best year since 2007. Once primarily a tool for selling luxury vehicles, leases are becoming more common among hot-selling mid-size sedans, such as Ford’s Fusion and Honda Motor’s Accord.

“We can expect that it will be a very good leasing month,” Michelle Krebs, an analyst at auto researcher Edmunds.com, said in a telephone interview for Bloomberg. “All you have to do is turn on the TV and you see lease ad after lease ad. There’s such an intense battle in that mid-size segment.” he added.

Leasing’s share of U.S. new vehicles sales has been around 22.5% in every month this year, according to J.D. Power & Associates. The four top months for lease penetration in the last decade, the extent of Power’s data, were in 2013, and each of the year’s first six months rank among the top nine, the Westlake Village, California-based researcher said.

Leases were 20% of General Motors Co.’s U.S. sales during the second quarter, up 4.6% from the same period a year earlier, Chief Financial Officer Dan Ammann said last week during the company’s quarterly earnings call.

Chrysler, majority-owned by Fiat, extended its streak of U.S. sales gains to 40 months as it began building a Jeep sport-utility vehicle crucial to maintaining its momentum. Chrysler today forecast a 15.8 million industry sales rate for July, including medium and heavy duty vehicles, which typically account for at least 200,000 deliveries per year.

The industry’s sales pace for the month keeps the U.S. in line for its best year since 16.1 million vehicles were sold in 2007.