Automakers sold Americans about 16.5-million vehicles last year as low interest rates, longer loan terms, declining gas prices and an aging fleet of cars on the nation's roads pushed consumers into dealerships. It was the industry's best year since 2006.
This year looks to be another strong one with most forecasters estimating sales will crack 16.5 million and could reach 17 million. The industry sold 15.6-million vehicles in 2013.
"We believe that consumers will continue to replace aging vehicles with newer and better models. The combination of relatively low interest rates and some cash rebates for vehicle purchases should also boost sales, along with the slowly recovering housing market," said Standard & Poor's credit analyst Nishit Madlani.
December was one of the best months of the year. Ford estimated the industry sold about 1.6-million vehicles in the U.S. last month, about 12% more than a year earlier.
“Everything you need to have a great month was in place: Consumers felt good about the direction of the economy, interest rates and fuel prices were low,” said Kurt McNeil,
GM said it sold 274,483 vehicles in the U.S. in December, up 19.3% from the same month a year earlier. Its sales for the entire year rose 5.3% to more than 2.9 million.
Ford said it sold 220,671 vehicles in December, up 1.1% from a year ago and the company's best December since 2005. But its sales for the entire year actually dipped by about 13,000 vehicles to just under 2.5 million. Ford blamed the decline on falling truck sales caused by the changeover to a new design for its F-150 pickup truck and a planned reduction in sales to rental car companies.
FCA US, which operates the Chrysler, Jeep, Ram and Fiat brands in the U.S., said its December sales reached 193,261 vehicles, a 20% increase over the same month a year earlier and the company's best December sales since 2004.
Nissan said its December sales rose 6.9% to 117,318 units, its best December ever. Nissan also set an annual sales record, moving nearly 1.4-million vehicles, an 11.1% gain from the prior year.
Toyota said its December sales rose 12.7% to 215,057 vehicles. For the year, the automaker sold almost 2.4 million vehicles, a 6.2% gain.
"December sums up what we've seen all year for automakers, and it's a fitting finish to a comeback year for the industry," said John Krafcik, president of TrueCar, the car shopping company. "Sales volume growth and the popularity of highly profitable vehicle segments – pickups, utilities and luxury vehicles – have been immensely beneficial to automakers' revenue and we expect more good news in 2015."
Some analysts believe that while auto sales will increase by a small amount this year, the industry is nearing a plateau.
Low interest rates and longer loan terms — the average car loan is now more than 66 months — are coaxing consumers to purchase cars earlier than they would have otherwise. With cars lasting longer and loans stretching to seven years or more, these consumers won't be back in the auto market for years.
"U.S. auto sales are dancing to a very different, and we believe unsustainable, beat," said Adam Jonas, an analyst with Morgan Stanley Research.
He said that easy credit is providing much of the fuel for the current car sales boom, but that longer-term trends such as rapidly declining driver's license penetration among America's youth could spell trouble for the industry in the future.