Car sales are expected to grow in 2014 and top 16 million for the first time since 2007, according to the 2014 new car sales forecast from car-shopping site Edmunds.com. The estimate is 16.4 million light vehicles sold next year, a 6% increase from the anticipated sales of 15.5 million for 2013 and the most since 16.5 million were sold in 2006.
The average age of cars on American roads has continued to rise, from 11 years in 2012 to 11.4 in 2013. That statistic has climbed over the last decade — in part due to advances in car manufacturing — but consumers who put off car shopping after the recession may not be able to wait much longer.
Lacey Plache, chief economist for Edmunds.com and author of the forecast, explained it this way: The average car travels 15,000 miles in a year, and if the average age is 11.4 years, the average car will have racked up roughly 170,000 miles in its lifetime.
“We’re already getting past a pretty substantial mileage. Cars are going to start breaking down,” Plache said. “Cars are getting older and older, and that’s going to force people back to the market and get new cars.”
Adding to the aging fleet, about 300,000 consumers will return to the market when their car leases expire in 2014, according to Plache’s forecast.
A Closer Look at Long-Term Growth
Despite the high sales volume, the year-over-year sales growth rate has slowed since 2012, when sales improved 13% over 2011. The anticipated growth rate for 2013 is 7%, and as previously mentioned, the 2014 growth rate is forecast at 6%.
Current events will likely not impact the forecast. Though auto sales were down in September, much of the loss can be contributed to the calendar: Labor Day weekend, which brings in a lot of money for auto dealers, partially fell in August, and there were only 23 sales days in September. (That’s low, according to Plache.)
The government shutdown and debt-ceiling debate are unlikely to depress sales, at least in the long term.
“If anything, we might see a few sales shifted from this year to next, if indeed the situation drags on,” Plache said, adding that October sales are most at risk, as furloughed workers or hesitant consumers may put off car shopping. “The worst-case scenario out there is that the government defaults and we’ll go into a deep recession — I think that’s a really unlikely scenario.”
Political turmoil aside, interest rates on auto loans have been at historic lows and credit has been increasingly available for consumers with less-than-sterling credit. A low credit score can translate into higher interest rates and an overall more costly auto loan, which is why consumers are advised to know their credit situation before car shopping so they better understand what they can afford. Checking their credit score (which can be done using tools that are free – Credit.com offers one) can help them decide whether to work on rebuilding their credit before they buy.
“There’s no reason to believe the current economic climate is going to suddenly cause a longer term slowdown to auto sales,” Plache said. “Credit is still widely available, interest rates are still low, and aside from the furloughed employees, the job situation hasn’t dramatically deteriorated. … We’re in a bit of a short-term crisis.”