Turns out, we snapped up around 1.4 million cars last month, an increase of around 9 percent over last year. That puts automakers on track to sell more than 16 million cars in 2014, the biggest auto sales number in eight years.
So what’s going on?
One of the big reasons car sales are so high this year? Banks have discovered the sweet business that is the auto loan.
“Banks have realized that when recessions hit, people may stop paying their mortgage payments, because it takes so long to get thrown out of your house, but very few stop paying their car payment, because those are so easy to repossess and you have to get to work,” says Larry Vellequette, with Automotive News in Detroit.
Carmakers have done their part to sweeten that pot, too. “For example Ram, on one of its trucks right now has a 0 percent financing offer for 72 months,” says Vellequette. “I mean, six years of free money and no payments for 90 days. That’s… I mean, a really attractive offer.”
It’s an offer many consumers have been waiting for. The average car on the road is more than 11-years-old, an all-time high. That means there’s a lot of pent-up demand right now.
“They’re coming out of this really depressing time, when we had the big financial crisis,” says Thilo Koslowski, Vice President and Auto Practice leader at Gartner.
But cheap money and easy loans have some seeing signs of a bubble. “That’s the $64,000 question right now,” says Dan Picciotto, Senior Director at Standard and Poor’s. He says the economic fundamentals of the industry seem solid, but, he says, the deep discounts and less-than-sterling loans needs to be kept in check. “Right now the industry is remaining relatively disciplined, but the track record of this industry is one where the risks emerge… It’s something that we continue to monitor.”
The average incentive on a vehicle in July was more than $2,700, up 7 percent from last year.