US auto sales expected to hit record high in 2015

US auto sales expected to hit record high in 2015

By Phil LeBeau

Six years after the recession forced millions of Americans to postpone buying a new car or truck, a forecast released Wednesday predicted retail auto sales in the U.S. will climb to a record high in 2015.

Despite a weak showing from the auto sector in September—when dealership sales fell 0.8 percent—J.D. Power and Associates said that sales of new cars and trucks at U.S. auto dealerships will climb to 13.83 million in 2015. That would put them slightly above the previous record of 13.8 million in 2004.

The improving economy and growing consumer demand for newer, more fuel-efficient vehicles that include the latest safety features and in-car connectivity are driving the trend.

“Right now the auto industry is in the midst of a cycle where sales and pricing are very strong,” said J.D. Power’s Deirdre Borrego. “I’m cautiously optimistic that will continue at least through next year.”

But it’s not just retail auto sales—vehicles that are sold directly to consumers—that are expected to see a boost. The firm’s forecast comes as Wall Street analysts are predicting total U.S. industry sales—which also account for the sale of fleet vehicles to rental car companies, corporations and government agencies—could top 17 million next year.

The increase, while welcome news for the auto industry, has led some to question whether the strong market is sustainable.

“As long as the economy remains strong and interest rates stay relatively low I think sales will hold up well,” Borrego said.

As retail sales climb to a record high, automakers and dealers are selling vehicles for record prices.

J.D. Power said the average transaction price paid by consumers at dealerships this year is $30,026, which will likely lead to an all-time high of $407 billion for retail sales in the U.S.

“Consumers are able to pay more for the cars and trucks they’re buying because auto loan interest rates have been so low,” Borrego said. “At the same time lenders are writing loans for longer terms, so monthly payments have stayed relatively flat for car buyers.”

The average monthly payment for new vehicle buyers is $457, according to J.D. Power. In addition, the firm calculates almost one-third of all auto loans for new vehicles are for a term length of six years.

Still, while the percentage of borrowers falling behind on their loans remains below average, some consumers are having trouble making their monthly payments. A recent report from Experian found that the percentage of auto loans that were delinquent or ended in repossession surged in the second quarter.