The U.S. auto industry is enjoying its best December in years and will easily set a new sales record in 2015, according to new estimates by analysts, who follow the industry sales trends, and the outlook for the coming years looks robust despite the higher interest rates looming on the horizon.
New light-vehicle sales in December are expected to be the strongest of any month since 2005, with 2015 on track to set an annual record with 17.5 million sales, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive.
With a strong close, 2015 is expected to set a total light-vehicle sales record of 17.5 million units, topping the previous high the Seasonally Adjusted Annual Rate, or SAAR, will hit the 17.8 million unit mark in December, making December 2015 the fourth best-selling month on record, surpassing the previous December record set in 2004.
“As 2015 comes to a close, the industry is expected to post its strongest sales month of the year,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. “With continued record transaction prices, consumers are on pace to spend more than $44 billion on new vehicles in December and $437 billion on new vehicles in 2015, both record levels.” The previous record of $407 billion in annual consumer expenditure was set in 2014.
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Humphrey also said the Federal Reserve’s increase in interest rates this week should have a minimal impact on new-vehicle sales.
Earlier this month, J.D. Power surveyed 2,301 consumers who expect to be in the market for a new vehicle in the next 12 months, asking them how a Fed rate hike would affect their purchase decision. In a scenario where the Fed raises interest rates by 1%, which is higher than .25 % increase approved by the Federal Reserve, 80% of consumers in the market for a new vehicle said they would not change their buying intentions; 13% said they would look for a cheaper car; and 7% would consider buying a used car.
“There is the risk of a knee-jerk reaction from consumers to big economic news, leading them to delay buying, but the survey suggests it’s a very small proportion of shoppers who are concerned about rates, particularly at this low level. In other words, we’re not expecting much of a negative impact,” Humphrey said.
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“We still expect consumers to be drawn into showrooms as manufacturers clear out inventory in preparation for the New Year.” Humphrey said.
“It’s truly remarkable that the auto industry is finishing off its best year ever just six years after the depths of the Great Recession,” noted Edmunds.com Director of Industry Analysis Jessica Caldwell. “Low-APR offers and tumbling gas prices are making it easy for shoppers to buy or lease a new car, but don’t overlook the products themselves.
“If you’re buying a new car today, you’re getting a safer, more fuel-efficient and more technologically-packed vehicle than ever before. Automakers are doing a great job giving the people what they want in a new car.”
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In another measure of the industry’s overall health heading into 2016, production increased while inventories declined. North American production in November 2015 was 1.46 million units, a 6.7% increase, compared with November 2014. Given demand, inventory levels decreased to a 65-day supply from a 69-day supply at the end of October, but down from 71 days at the same point last year, according to LMC Automotive.