Low interest rates support U.S. auto sales despite slow GDP growth

Nov 30, 2014

Auto sales were strong in 2014, transaction prices were good, and incentives were kept reasonable. All in all, a good year for U.S. auto industry, despite a record number of recalls
Credit IIHS

Auto sales continue to perform well in 2014, say analysts, even though one of the usual ingredients in that success is missing -- strong GDP growth.

"The economy has not necessarily cooperated yet," says Jeff Schuster of LMC Automotive.  "Not to the level, that 3% level, which is typically expected to support auto sales.  And we haven't really had that."

Schuster thinks 2014 vehicle sales will end up around 16.4 million.

Jessica Caldwell of Edmunds.com is just slightly more optimistic.  She thinks the industry could sell 16.7 million by the end of December.

"It looks like 2014 is going to be the strongest year since well before the recession started," says Caldwell.

One of the big factors supporting the recipe for strong sales has been low interest rates. 

Add to the mix a lot of well-designed, fuel-efficient, and high-quality vehicles - stir in a bit of residual pent-up demand - and throw in a pinch of improving consumer confidence.

Schuster says sales for the second half of the year are turning out to be stronger than the first half.