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Auto sales and consumer loans – both growing!

Auto sales and consumer  loans – both growing!

By Louis Rumao 

Total US sales of light vehicles in 2016 is projected at 17.6 million to 17.8 million units, up from 17.4 million a year ago – a good news for the auto OEM’s as well as the supplier industry, including the tyre industry.

IHS Automotive, a Southfield, Michigan-based forecasting firm, expects US auto sales will hit record levels in the next two years, reaching a peak of 18.2 million new cars and light trucks sold in 2017 before leveling off due to rising interest rates and higher vehicle prices. Charles Chesbrough, senior principal economist for the firm, said low petrol prices, enhanced consumer confidence, strong housing starts and favourable auto loan financing are all combining for better-than-expected sales. “We’re back,” he said. “We’re all the way back from the recession of 2009; the vehicle market is looking very, very strong.”

According to the Rubber Manufacturers Association (RMA), total US replacement and OE tyre shipments were nearly 310 million units in 2014 and slightly higher in 2015. “Passenger original equipment shipments are expected to increase year-over-year due to anticipated growth in auto sales, while replacement tyre shipments are expected to decline less than one per cent,” said the RMA. “Light truck and commercial truck original equipment and replacement ture shipments are expected to show similar growth in 2016.”

According to the US International Trade Commission (ITC), US companies imported a record 150.7 million passenger tyres and 26.9 million light truck tyres in 2014. While Canada and Mexico host 12 consumer tyre production plants that can produce 46 million tyres a year, there are some 80 companies in China that can produce more than 400 million passenger and light truck tyres, and annually export about 60 million tyres to the US.

Vehicle leasing vs. buying

For Americans, ownership of a motor vehicle is the second-most expensive investment after housing. The average new vehicle transaction price in 2015 was $33,188, up 2.5 per cent from $32,386 in 2014. While very few vehicles are purchased with cash payment in full, most transactions are through either “finance-to-own” or “lease-to-use” basis. Loan payments are usually higher than lease payments because you’re paying off the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.

(Full text in TA, June/July)

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