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June auto sales: There's good news and bad news

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David Zalubowski/AP/File

(Read caption) In this 2006 file photo, unsold 2007 RAV4 sports-utility vehicles are shown on the lot of a Toyota agency in the east Denver suburb of Aurora, Colo. New auto sales are expected to have hit a five-year high in June, but the news isn't all good.

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There's good news and bad news for those in the automotive sector.

GOOD NEWS

We'll start with the good news (kicking off with the bad stuff seems cruel). According to a report in AutoNews, new-car sales for June are likely to reach heights not seen since before the Great Recession.

J.D. Power and Edmunds both predict that when all the dust has settled and all the beans have been counted, sales figures for June of 2012 will ring in a full 20% above June of 2011. That works out to be 1.27 million new-car sales for the month -- the highest June sales since 1.46 million were recorded in 2007.

Given the stellar sales figures from earlier this year, that growth isn't entirely surprising. And to be fair, stats from 2011 were atypically low, due to problems caused by the Tohoku earthquake and tsunami, which crippled Japanese automakers like Toyota and Honda in March of last year.

Another factor that may be boosting sales stats is the age of vehicles currently on the road. According to Experian Automotive, there are now 245 million vehicles in operation in the U.S., and their average age is a whopping 11 years

Why are we driving such old cars? Two reasons, really: (a) many modern vehicles are better made than their predecessors, so they're lasting longer, and (b) customers still wary about the economy have avoided upgrading to new rides.

Industry watchers agree that as the U.S. economy improves in fits and starts, those old vehicles represent huge growth potential for automakers.

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BAD NEWS

There is, however, some bad news, too: the seasonally adjusted annual rate (SAAR) for auto sales may have slipped below 14 million for the second month in a row. Analysts are at odds on the exact number, but figures range from 13.6 to 13.9 million. (FYI, General Motors sees the total much higher, between 14 and 14.2 million.) 

Why the dip? Many point the finger at Europe and the tremors its financial situation has sent through the U.S. markets. However, a very encouraging deal hammered out at the European Union Summit sent stocks soaring on Friday, so that -- combined with low gas prices and increasing access to consumer credit -- could put the SAAR over 14 million again by the end of July. Stay tuned....


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