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 $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.
Kelley Blue Book analyst Alec Gutierrez said GM is benefiting from its new lineup of SUVs, which hit the market at a time when buyers are gravitating toward bigger vehicles. Sales of the Chevrolet Tahoe large SUV nearly doubled to more than 11,000, while sales of the GMC Yukon more than doubled to 3,946. Cadillac Escalade sales were up 57 percent.
Toyota's sales rose 3 percent as the Camry and Corolla sedans both posted double-digit gains. Sales of the new 4Runner SUV were up 42 percent.
Ford's sales dropped 6 percent as the company cut back on discounts for the F-Series pickup, which is the best-selling vehicle in the U.S. Ford is trying to limit sales of the outgoing F-Series as it prepares to close its truck plants and change over to a new, aluminum-sided F-150 pickup, which will go on sale late this year. F-Series sales fell 11 percent in June to 60,560.
Other automakers said:
-- Chrysler's sales jumped 9 percent on strong demand for the new Jeep Cherokee SUV and other models. It was the company's strongest June since 2007, with gains for the Jeep, Ram, Dodge and Fiat brands.
-- Honda's sales were flat. Sales of most models declined, including the Odyssey minivan and CR-V SUV, but sales of the Accord and Civic sedans were up.
-- Nissan's sales were up 5 percent on strong sales of the new Rogue SUV as well as higher car sales. Sales of the Sentra small car were up 68 percent.
-- Hyundai's sales rose 4 percent on the strength of the new Sonata sedan, which jumped 29.5 percent.
-- Subaru's sales were up 5 percent on strong demand for the new Forester, which was up 30 percent.