U.S. auto sales poised for record sixth straight year of growth

The U.S. auto industry, which has been growing since the government bailout of GM and Chrysler, is poised for an unprecedented sixth straight annual sales increase next year, driven by job gains, readily available credit and lower prices at the pump.

Deliveries of new cars and light trucks in 2015 will probably total 16.7 million, the average estimate of 12 analysts surveyed by Bloomberg News and the most in a decade. Yesterday, the National Automobile Dealers Association weighed in with an even more bullish forecast, predicting more than 16.9 million light-vehicle sales.

Additional jobs have given Americans confidence to take out loans on cars, and the cheapest gasoline in almost four years means one less thing to worry about when mulling a big-ticket purchase.

"Consumers are comfortable with their financial positions and they're not concerned that they're about to lose their jobs," said Alec Gutierrez, an industry analyst for Kelley Blue Book. "They're buying cars not just because their car broke down, but because they might want something new and flashy, which signifies that they aren't being completely risk-averse."

Sales rose five years in a row twice since 1927, according to data compiled by researcher Autodata Corp. and trade publication Automotive News. Once was from 1933 to 1937, when the industry was still getting established. The second time was from 1996 to 2000, when sales peaked at 17.4 million.

Deliveries for 2015 could exceed this year's by about 400,000 units. Growth rates have been slowing as sales approach the 16.8 million averaged from 2000 to 2007, before the financial crisis stymied demand and led to the bankruptcies of General Motors Corp. and Chrysler LLC.

GM and Chrysler were propped up by aid given under then- President George W. Bush, then were shepherded through expedited bankruptcies by President Barack Obama's auto team. The U.S. and Canadian governments helped pay for the restructurings.

Sales rose more than 10 percent each year from 2010 to 2012, then growth slowed to 7.6 percent last year. The total may rise 4.5 percent this year to 16.3 million, according to an earlier survey of analysts.

In 2016, sales may slide back to about 16.5 million, said Steven Szakaly, chief economist for the McLean, Virginia-based dealers' association. Deliveries will wind down as recent buyers pay down leases and loans, he said.

"In our view, 2015 could be the beginning of a plateau in sales," he said. "We may have another good year, but it's hard to see us continuing at the rates we've seen the last few years."

More incentives and increased purchases from young drivers would be needed for new-car sales to top 17 million next year, he said. Job gains could have "outsized effects on the Millennial generation," he said. Along with employment, cheap gasoline will continue to drive demand for new vehicles such as trucks and sport-utility vehicles, Szakaly said.

"Low gasoline prices aid with want-based decisions versus need-based decisions," said Gutierrez, the KBB analyst who predicted 16.8 million sales next year. "It adds fuel to the fire. Consumers were already considering trucks and SUVs over more compact cars. Low gas prices only exacerbate the shift back toward vehicles that are larger and meet the demands of the consumer."

The lower cost of gasoline improved NADA's 2015 prediction by as much as 250,000 units, Szakaly said yesterday on a conference call. Light trucks could comprise as much as 57 percent of the market due to more affordable fuel, he said.

Regular fuel fell to $2.88 a gallon on Nov. 17, according to motoring club AAA. That's the lowest price since late November 2010. Since reaching a high this year of $3.70 in April, prices are off 22 percent.

GM reported third-quarter profit that beat estimates in part because North American customers flocked to pickups and SUVs. The largest U.S. automaker's operating profit rose 12 percent to $2.45 billion, driven by a 51 percent rise in domestic sales of the Cadillac Escalade SUV this year through October and a 6.4 percent gain in Chevrolet Silverado pickup deliveries.

Toyota Motor Corp., the world's largest automaker, increased deliveries in the U.S. by 5.8 percent through October, paced by a 26 percent surge in sales of its RAV4 sport-utility vehicle.

Consumer confidence, aided by job gains and inexpensive fuel, gained more than forecast in November, reaching a seven- year high. The Thomson Reuters/University of Michigan preliminary sentiment index rose to 89.4, the strongest since July 2007.

Employers have added an average 228,500 workers a month to payrolls so far this year, the strongest pace since 1999. The U.S. unemployment rate fell to 5.8 percent, a six-year low, in October and 214,000 workers were added to payrolls.

Consumers with stocks in their investment portfolios have a reason to be more upbeat. The Standard & Poor's 500 Index has gained more than 10 percent this year.

"2015 is shaping up to be a good year for the U.S.," Szakaly said. "I think that economic growth will swamp any effects within the market."

A hiccup in the economy could impact new-vehicle sales, but "it's not like we're waiting for the next recession," Gutierrez said. "The economy doesn't need to sputter before growth flattens."

Lacey Plache, chief economist for car-shopping website Edmunds.com, said she thinks this will be the last year of growth.

"Certainly we've seen a lot of demand growth, and automakers have matched production to what people are willing to buy," she said. "We'll start to see demand growth slow, and supply will match accordingly."

The 16.9 million sales forecast by the National Automobile Dealers Association depends on interest rates remaining low, Szakaly said. The Federal Reserve is expected to raise interest rates in 2015. That increase will be "steady rather than abrupt," he said, which is "key to continued momentum."

Longer loan terms and lower monthly payments have lured consumers to dealerships. Auto loans increased $22 billion in the third quarter to about $941 billion, according to IHS Global Insight.

"If you have a job, you're more likely to buy a car. If your job is steady, you're more likely to commit to a loan," Plache said. "The fact that automakers are assuming that risk says a lot about their confidence."

As the credit market has expanded, people who are less creditworthy have entered, Plache said. She doesn't see any indicators that credit is too loose, though "it's something to watch for sure."

A relative shortage of low-mileage used cars has also benefited sales of new cars and trucks. The squeezed supply has made two- and three-year-old models almost the same price as a new one, drawing shoppers to the new-car end of the market.

"Consumers are seeing that it's marginally more expensive to buy a new car, and it's hard to beat that new-car smell if it doesn't come at a hefty premium," Gutierrez said.

The price of used vehicles will trend down as supply improves "essentially every day," Joseph Spak, analyst at RBC Capital Markets LLC, wrote in a note to investors.

Consumers could turn back to the used-car market if interest rates on loans increase, Gutierrez said.

"With the downward pressure on used-car prices, and if interest rates start increasing, leases could become not as attractive in late 2015," he said.

The U.S. auto market is also growing without Detroit pouring on major incentives. Discounts and other promotions tracked by researcher Autodata averaged $2,764 this year through October, $28 less than the average for 2008.

"The growth that we've seen has come from a more disciplined approach from the manufacturers. It's not as if they're producing as much as possible then throwing incentives on the hood," Gutierrez said.