US November Auto Sales Surge to 4.5-Year High
America's appetite for new cars and trucks surged to a new high in November as auto sales ran at their fastest pace since early 2008. "Business is great!" says Tammy Darvish, vice president of DARCARS Automotive Group, which owns 34 auto dealerships in the Washington, D.C. area. "People are buying again, there's a steady flow of customers. It's different from a few years ago."
In 2009, as the recession dropped America's economy to its lowest point, auto sales collapsed to 10.4 million for the year. Since then the auto industry has gradually recovered.
- '09 10.4 Million
- '10 11.5 Million
- '11 12.8 Million
- '12 14.5 Million (estimate)
This year sales are on pace to total 14.5 million vehicles, with November posting the highest monthly sales rate of the year at 15.0 or 15.1 million vehicles.
The official sales pace will be announced Monday, but analysts saw business at dealerships pick up throughout November. J.P. Morgan's analyst Ryan Brinkman says, "Automakers we spoke to were excited about the gathering industry strength into month-end." Hyundai posted an 8 percent gain in sales last month with its best November ever in the U.S.
(Read More: Sticker Shock: New Car Prices Are Going Up.)
The "Perfect Storm" Kicking Up Sales
The resurgence in auto sales is due to a combination of factors coming together all at once. "It's a perfect storm, of the good variety," says Darvish.
Improving Economy: With the unemployment rate falling, the stock market improving and home prices recovering, consumer confidence in the economy is at a 4.5-year high. More than almost any other factor, consumer confidence is perhaps the best gauge of the willingness Americans have for buying a new car or truck.
(Read More: Optimism Fuels L.A. Auto Show.)
Housing Rebounds, So Do Truck Sales: A s housing starts have picked up in the U.S., so have pick-up truck sales. That's not surprising since an improving housing market means contractors and construction firms feel more comfortable replacing their old truck with a new one. "Through the first three quarters of the year, pick-ups were roughly 10 per cent of the industry's total sales. In October they were up to 11.5 per cent," says Mark Fields, chief operating officer at Ford.
Friendlier Auto Loan Terms: With the more banks willing to write auto loans for a wider number of buyers, the terms for auto loans have never been better. Interest rates (for those who don't qualify for 0 percent) are near historic lows of 3-5 percent. Banks are also writing more auto loans that stretch out at least six years. As a result, the average new car monthly payment of $452 is only slightly higher than a few years ago.
Pent-Up Demand: America is at the start of a long-term replacement cycle when it comes to their car or truck. The recession forced so many people to keep driving their old vehicle that they are now at a point where they need or truly want to buy something new. The average age for vehicles in the U.S. is 10.8 years, with 20 percent of the cars on the road at least 16 years old according to automotive research firm J.D. Power.
(Read More: The New American Standard: An Asian Model Car.)
The Sandy Rebound
One other factor behind the strong sales in November is the rebound in sales for areas hit by Hurricane Sandy in late October. The storm destroyed an estimated 250,000 vehicles. At the same time, the Sandy hurt new vehicle sales in New York and New Jersey.
In a typical month, New Jersey accounts for 3-5 percent of all the auto sales in the U.S. Shortly after Hurricane Sandy, New Jersey's sales fell to 1 percent of the national total, but they have steadily rebounded since then.
Even more encouraging is the fact sales are expected to be stronger in December. Kelley Blue Book says the market is set up for what could be, "a very strong December."
—By CNBC's Phil LeBeau