U.S. auto sales hit their highest rate so far this year in July, but domestic manufacturers lost business to foreign competitors.

Overall, Americans bought more than 1.5 million cars and light trucks last month as dealerships slashed prices and raised incentives. The figure was down 4.5 percent from the buying frenzy of July 2002.

The top three US manufacturers, General Motors, Ford and DaimlerChrysler all saw sales slip. But foreign companies such as Toyota, Honda and Nissan gained market share.