It’s a question that the entire auto industry finds itself asking: Can 2015 beat 2014 on car sales? It’s a tall order; 2014 was a record breaking year for both cars sold and loans originated. And it looks like 2015 might be up to the task of beating it.
Money, Money, Money
The latest numbers paint a very strong picture of a boom in progress. May saw a high of 17.7 million vehicles sold off of dealership lots, the strongest month since the industry set a sales record in 2005. June was close behind, with dealers selling 17.1 million vehicles during the month.
Similarly, the amount of money in play has never been higher. The total amount of US auto loan debt is edging towards $1 trillion, a new record driven in part by new and enticing extras on popular cars and a steadily rising average price on a new car. In fact, new car pricing has risen steadily since the economic recovery, pushing up total originations.
In other words, it’s currently a boom time for manufacturers and dealers as consumers spend more and more on new cars. But will this cycle last forever … and is a boom time a good time for consumers to buy a new car?
Long Terms, New Questions
A question that dealers and manufacturers have yet to truly answer is how lengthening loan terms will affect the industry. As costs have risen, more and more Americans are opting for longer loans; the loan term average rose to five and a half years recently, meaning that many cars sold now have drivers who won’t be shopping for a new vehicle until the next decade.
Or possibly even longer; data is increasingly showing that due to better quality, fuel economy, and ease of repair, cars sold a decade ago are still on the road, and the overall longevity of your average car is only going up. It’s not uncommon for a new car to stay with one owner for more than a decade, now, which raises the question of what happens when the auto industry is out of consumers to sell new cars to for a while.
For consumers, the question is a bit simpler. While average prices are high, that reflects all cars, including work vehicles and luxury cars. Right now, car dealers are competing with each other to offer you the best price and collect their share of a growing pie.
The boom also means there’s more latitude for consumers, especially those with credit they’re still repairing. Because cars are selling and there are plenty of customers, lenders and dealers are more willing to offer consumers a deal; in fact, part of this boom has been driven by the “subprime” market.
That said, don’t let the boom times go to your head. Plan out carefully what car you need, and look for financing outside the dealership. The popularity of new cars means alternative lenders are getting into the field and competing for your business. So shop around, get quotes, and find the financing that’s right for you; thanks to the boom, it’s there for the taking.