Auto sales have risen to their highest level since the recession, as cheap loans and a surge in leasing have combined with pent-up demand to send the reborn industry soaring far above much of the still-struggling U.S. economy.
Automakers sold about 15.6 million new cars and trucks in 2013, up about 8 percent from 2012. The growth continues a strong turnaround for an industry that was reeling when annual sales bottomed out in 2009.
Despite aneconomy marked by high jobless rates and flat wages, customers have been flocking to car dealerships. They have been are lured by what analysts call an ever-improving selection of vehicles, free-flowing credit and a growing sense that the broader economy is finally on the mend.
“Home prices have moderated and that is good because it makes people feel a little more confident,” said Steven Szakaly, chief economist for the National Automobile Dealers Association, or NADA. “Debts are being paid down and that certainly makes people feel wealthier. When you add to that the tremendous number of new products on the market, it makes the decision to buy that much easier.”
With the average age of the nation’s auto fleet now approaching 12 years, getting a new car or truck is a growing necessity for many consumers. Even a slowly healing economy means that banks feel better about making car loans more widely available, including for people with dings in their credit history. Interest rates are low. For many people, leases — which dried up during the recession — are the preferred option for securing a new car.
After tumbling to just 12.6 percent of all vehicle “sales” during the industry’s recent low point in 2009, leases accounted for 23.3 percent of all new car transactions in 2013, according to Kelley Blue Book, which tracks the auto industry.
“Leasing used to be a premium car feature, but now we see more mid-size and compact cars being leased,” said Karl Brauer, senior analyst for Kelley Blue Book. “So if people are interested in a new car, they don’t even have to buy it.”
The improving auto sales are coming after a dark period when the domestic car industry was on the verge of collapse. The federal government bailed out General Motors and Chrysler, which coincided with deep layoffs and a restructuring of the industry and much of the supply chain — all of which are crucial to the broader economy.
“In general, we have seen the automotive sector lead the recovery in part because it went through a far deeper decline and rebuilding than other industries did,” said Szakaly, the NADA economist. “We went through two bankruptcies and a complete restructuring of the industry.”
Now the U.S.-based automakers are leaner, burdened by much less debt and highly profitable. And like foreign other automakers, they are reaping the benefits of technological breakthroughs. Big SUVs now are routinely able to get good fuel efficiency. Meanwhile, computers and electronics — from digitally streamed music and navigation systems to accident avoidance systems, Bluetooth connectivity and backup cameras — are increasingly becoming common in vehicles.
The innovation has helped drive sales without automakers having to resort to deep discounts and other incentives, analysts said. New car prices averaged $32,890 last month, down just 0.5 percent from the previous December, according to Kelley Blue Book.
Ford reported that its sales were up 11 percent in 2013, led by a strong showing of its F-Series pickup, which is the top-selling vehicle in the nation. The Escape crossover and Fusion sedan also were strong sellers.
General Motors said its sales rose more than 7 percent last year. Kurt McNeil, GM’s vice president of U.S. sales operations, said, “2013 was the year that GM and the auto industry put the last traces of the recession in the rearview mirror, so now we can devote our full attention to the things that matter most to customers.”
Toyota’s U.S. sales were also up more than 7 percent last year, as were sales of Hondas. Chrysler Group and Nissan both reported that sales increased 9 percent in 2013.
Hyundai and Kia, which experienced explosive growth in the United States in recent years, saw sales slip 0.4 percent in 2013. Also, sales of Volkswagens fell nearly 7 percent, which analysts blamed on an aging product line.
With the broader economy experiencing steady, if mediocre, growth, and jobless rates continuing continuing to decline, many analysts said 2014 should be another banner year for auto sales.
“I think ’14 will be better than, ’13,” Szakaly said. “While 2013 was kind of a transition year for the economy, we should see economic growth [become] stronger this year, and that will help new-vehicle sales.”