January 6th, 2015
It turns out 2014 proved to be a good year for the automotive industry as a strong showing from December pushed the year's total car sales to their highest level in roughly eight years, according to CNNMoney.
Though automakers have yet to release official data for 2014, analysts expect to see an annual total of more than 16.4 million sales once the numbers are tallied. Compared to 2009, projected sales are likely to be 60 percent higher, as drivers currently have an advantageous economic environment in which to purchase vehicles. Further, as millions of Americans begin to experience the benefits of an improving job market, more drivers are able to afford new cars, thus boosting total sales.
CNNMoney pointed at low gas prices specifically as a significant economic driver for the industry. Across the U.S., gas prices fell considerably in 2014, particularly in the last six months. With cheaper gas, drivers are able to save money at the pump, thus impacting the financial decisions of millions. The U.S. Energy Information Administration noted national gas prices averaged $2.229 for the final week of 2014 , down more than 10 cents from the previous week. In addition, compared to this period one year ago, prices have dropped more than a dollar.
The future of car sales
Though 2014 finished on a high note, analysts still have some uncertainty as to how the auto market will perform in 2015. With a large number of cars sold in the previous year, it may be hard for the industry to maintain such record sales. One of the main reasons, The Wall Street Journal suggested, was a potential increase in interest rates from changes in monetary policy from the Federal Reserve.
The Fed has been hesitant to revise its current economic policy in fear that a rate hike may put a damper on a growing economy. As a result, interest rates have remained near historical lows in the hopes of increasing borrowing and spurring growth. However, with strong employment numbers being released every month, the Fed may look to change its position on interest rates, perhaps with an increase.
If this occurs, drivers will likely have to face higher interest rates on future car loans, which will affect overall sales. Also, gas prices aren't likely to remain this low for a long time and at some point in 2015, will begin to rebound. This price jump could also make Americans rethink their buying decisions.
With more cars purchased, the need for insurance rises. Ring in 2015 with a new auto insurance policy.
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