US Auto Sales Soared, Best November Since 2003

US Auto Sales: Key Factors

For an automobile consumer, the key factors that affect the decision to purchase a new vehicle is:

1. How easy he/she can get access to the funding (auto loan)
2. How old is his/her current car
3. How good is the new car model

The below chart is sourced from WSJ.


For factor #1, it looks like financial institutions have lowered the bar for approving car loans. According to the credit-monitoring firm Experian, now 20.4% of all auto loans are sub-prime loans, which is granted to borrowers in the lowest credit score range. Banks are even providing longer term loans. Get this, the average long term loan now reaches 5.5 years. This requires less monthly payment on average, which makes it possible for a person to afford a more expensive car with the same monthly contribution.

For #2, because of the  2008 financial crisis, people used to keep their cars longer. This leads to the current average age of cars on the road to rise to more than 11 years! We all know when your car gets older, no matter how reliable it is, it still needs repair. The situation will get worse and worse, to the point that it makes sense to buy a new car instead of maintaining the old car, economically speaking of course.

For #3 that is more obvious – many new car models have revolutionary enhancements during the past 1 – 2 years. For example turbo-charged engines, hybrid powertrain, all kinds of electronic features (including functionality like the semi-auto pilot), advanced material car body (even the Ford F150 truck body is full aluminum now). This list can go on and on.

Therefore, 2014 is the best year for the automobile industry since 2008, and this November’s sales rate reached the best level since 2003, with the annualized number to be 17.1-million.

For the 17.1-million rate, light trucks contributes 9.2-million units, and passenger cars provides another 7.9-million. This is because gas is very cheap now so people are more willing to buy big engine, larger and heavier vehicles – trucks and SUVs.


Who win’s this November’s Number Game?

Many auto makers saw a big gain in US auto sales in November, compared to last year’s November: GM gained 6%; Toyota gained 3%; Chrysler is one of the best winner, whose sales increased by 20%; Honda sits between GM and Toyota, with sales up 5%. Subaru is probably the No.1 winner: its sales increased by 24%.

But there are still companies with less sales: for example Ford, sales decreased 2%, which the company attribute this to the factor that it’s just starting to sell the new aluminum-body F150, which used to be a big portion of the sales figure. Nissan also saw a 3% decrease as well.

In fact, all of the above analysis can be summarized into one sentence: Americans really like cars, plain and simple.


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