But who's buying all these cars? And what are they getting for their money? J.D. Power has some ideas.
The recent surge in auto sales is due in part to a particular kind of shopper -- namely, the one with a poor-to-middling credit rating.
According to J.D. Power, shoppers with FICO scores in the C tier (625-649) and D tier (0-624) have been returning to showrooms in droves. During the first two months of 2012, the number of new-car buyers with C ratings jumped 19%, and D-tier shoppers jumped 23%.
Those figures outpaced sales growth among shoppers who sat higher up the credit ladder. Sales among A+-tier (720-999), A-tier (680-719), and B-tier (650-679) shoppers grew 7%, 11%, and 15%, respectively.
Why is that? It's mostly due to the easing of credit restrictions and the increased availability of longer-term loans, especially those of the 72-month variety. Combined, these two factors have given consumers new buying power and allowed many to return to the market after being shut out during the credit crunch of the Great Recession.
Cars are pricey. As we reported yesterday, incentives are low, and J.D. Power says that average transaction prices for the first two months of 2012 hovered at $27,953. We've seen higher prices -- in 2009, for example, when automakers couldn't afford to offer as many incentives -- but it's still well above historical averages.
Interestingly, new-car prices have ballooned even as vehicles have gotten smaller. Those vehicles, however, aren't the subcompact econoboxes many of us remember from our youth: cars like the Chevy Sonic, Ford Fiesta, and Honda Fit are jam-packed with high-tech infotainment systems and other amenities. Many, like the Toyota Prius, also arrive with hybrid and electric powertrains that make them more costly to purchase, but cheaper to operate down the line.
In that same vein, J.D. Power notes that engines are also downsizing, though they're adding turbochargers to keep up. In 2008, 18.3% of new light vehicles came with 8-cylinder engines. During the first quarter of 2012, that figure stood at just 12.7%.
At the same time, 2008 sales saw four-cylinder engines placed in 42.7% of new cars. So far in 2012, they're found in 54% of vehicles sold. Maybe the Cadillac ATS is the face of what's to come, after all.