December could turn out to be the best month for U.S. auto sales in a decade. That could push the sales totals for the full year to an all-time record. And that's very good news for both Ford (NYSE:F) and General Motors (NYSE:GM).
What's the story?
That prediction comes from a new forecast from analysts at J.D. Power and LMC Automotive. They estimate that U.S. sales of "light vehicles" (cars, pickups, and SUVs) will total 1,400,199 units in December, up 6% from a very strong result last December. If that holds, it will mean that 17.5 million vehicles will be sold in 2015, which would be an all-time record for U.S. new-vehicle sales.
The analysts see December's sales getting a boost from the calendar. This month has 28 "selling days," meaning days other than Sundays and holidays when most auto dealers are closed. That's the most in any December since 2009. On top of that, the month has five weekends, for the first time since 2012.
Add in all of the other factors driving new-vehicle sales, including still-low interest rates, an improving economy, and cheap gas, and it's a near-ideal scenario for automakers.
The analysts say that this week's hike in interest rates is unlikely to have a significant impact on the pace of new-vehicle sales. J.D. Power recently surveyed 2,301 consumers who expect to buy a new vehicle in the next year, and found that 80% said that higher interest rates would have no affect on their decision.
Of course, the automakers are taking full advantage of the sales momentum with year-end discounting and promotional events, helping to boost traffic in dealer showrooms.
Ford's pickups appear to be on a sales tear
Ford (NYSE:F) officials have hinted that sales of F-Series pickups have been booming in recent weeks. The company expects the F-Series line to once again be America's best-selling truck line in 2015, the 39th year in a row that Ford's pickups have won that title.
Ford recently shifted away from a fixed-price promotion that it had originally planned to run through the end of the year. That promotion produced mixed results last month: Sales of some Fords jumped, but dealers said that many consumers found the promotion confusing. Ford reverted to a more traditional "holiday sales event" with cheap-financing and cash-back offers as of Dec. 1.
Lots of consumers are paying top dollar for their new rides
Another theme of recent months has been high average transaction prices: Consumers are paying more than ever, on average, for their new vehicles. Low interest rates and greater availability of longer-term loans (72 months or more) have apparently encouraged many buyers to choose larger or more lavishly equipped new rides.
J.D. Power's John Humphrey, who leads the company's global automotive practice, sees that trends continuing in December. "With continued record transaction prices, consumers are on pace to spend more than $44 billion on new vehicles in December and $437 billion on new vehicles in 2015, both record levels," he said in a statement.
General Motors' average transaction price in the U.S. was a hearty $35,800 in November, thanks in part to very strong sales of pickups and GM's popular car-based "crossover" SUVs. Likewise, Ford said that the average transaction price on its market-leading F-Series pickups was $42,300 last month, up about $2,500 from a year ago. Its average transaction prices across the board were up roughly $3,800 from December of 2014, it said.
The upshot: Both Ford and GM stand to book big profits again
Long story short, December is likely to be another bit of good news for both Ford and GM. Both have generated very strong profits in North America in recent quarters, thanks to big sales of high-profit-margin trucks and SUVs and a determination to avoid excessive discounting. If December goes as these analysts anticipate, both automakers should have very good results to announce in their fourth-quarter earnings statements.