January 9, 2014

Like a puzzle, all the pieces need to fall in place if 2014 is to realize another year of increases for auto manufacturers.

U.S. car and light-truck sales (new) reached 15.6 million units in 2013 for an increase of 7.6% from 2012. Industry experts are in agreement that total sales for 2014 can reach 16 million.

The positive signs are in place. Let's start with the average age of 11.3 years for passenger cars and light-trucks combined on the roads today. IHS Automotive estimate analysts find this represents a 14% increase since 2007. IHS data also shows for the five years prior to the recession, average age rose only 4%. This indicates millions of older, high mileage vehicles are mechanically nearing a point where repair is more costly than the value of the vehicle.

Interest rates continue to be low and there is stiff competition among lenders. When the average lender relationship per dealer is 9.5 you can be guaranteed credit is available. More debt is expected for the average buyer according to the 2014 TransUnion Auto Loan Forecast. The forecast reported Auto loan debt per borrower is also expected to jump more than $1,000 from a projected $16,942 in Q4 2013 to $17,966 in Q4 2014.

What could slow new auto sales? Let's begin with the Affordable Care Act (ObamaCare). There continues to be uncertainty and consequently what impact it can have on consumer confidence and spending ability is unknown at this time.

"Unless there is a real shock to the economy, we don't envision auto loan debt levels to drop for quite some time," said Peter Turek, automotive vice president in TransUnion's financial services business unit.

Note: TransUnion's forecasts are based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates and real estate values. The forecasts would change if there are unanticipated shocks to the global economy.

Perhaps the 2014 North American International Auto Show (Jan. 18-26 at Cobo Center, Detroit, MI) will provide a gauge of what can be expected in 2014. The Detroit News reported that an estimated 5,000 or more automotive journalists and perhaps 750,000 potential car buyers will be attending the show.

There should be excitement when about 50 new cars, trucks, crossovers and concepts make their debut. As the Detroit News reported, Ford alone plans to launch about 23 new products this year.

The number one selling vehicle in the U.S. for the 32nd consecutive year is the Ford F-series pickup. At the show Ford will display what I expect to be one of the crowd pleasers. With the introduction of the "aluminum intensive" design that reduces 500 or more pounds off the truck's mass there will be great interest. This design could give an increase of 5 MPG or better in fuel economy.