The doomsday talk surrounding the U.S. auto industry is a relic of financial crises past. Month after month of strong sales have put the industry on pace to beat all previous sales records.
Through November, 15.82 million cars have been sold in the U.S., up 1.4% compared to the same period last year. The industry is pace to hit 18.55 million vehicles sold, which would easily trump the previous peak of 17.35 million in 2000.
The industry has come a long way from the 2009 auto sales trough, an era of financial market busts and bankrupt automakers, when sales dipped to as low as 11 million cars, the lowest total since 1981. If the most recent crisis was a potent cocktail of weak consumer demand and economic turmoil, the inverse is true for 2015: Cheap gas, high incentive pricing, and, in November’s case, terrific Black Friday deals all factored in to an uncharacteristically strong November sales month.
The most important sales driver, though, is pent-up demand for cars, according to Kelley Blue Book senior analyst Karl Brauer, who says that people are getting sick of driving their beat-up, 11-year-old cars they held onto when they couldn’t afford a new car during the recession, and that are becoming too costly to fix.
“There remains this built-up pressure, almost like a dam, and the sales we’re seeing now are overcoming that,” Brauer said. “We’re going to keep seeing that for the foreseeable future.”
Leading the would-be record sales pace are the “Detroit Three” — Ford, General Motors, and Fiat Chrysler — whose light truck sales, including small SUVs, are fueling the growth. According to Autodata Corp., 59% of November sales volume came from the light truck segment, while the remaining 41% of sales come from other passenger car segments. This isn’t all that surprising if you look at gas prices throughout the year, which have been lower than analysts predicted and continue to drop. The increased popularity of larger cars has also resulted in pricier purchases: The average transaction price for new cars was $33,801, according to Kelley Blue Book, the highest it’s ever been.
Brauer says that financing terms, including longer loan periods (new and used vehicle loan terms between 61 and 72 months have reached all-time highs), have helped encourage consumers to purchase cars in a way that helps them afford their monthly payments–while buying more expensive vehicles overall.
Historically, December is a strong month for auto sales since dealers offer year-end promotions to help clear their stock ahead of new inventory, and that trend should continue, Brauer says, in addition to the strength seen in November.
So, if you missed the great November of car sales, don’t worry, December should offer all the great deals you’re used to getting. Automakers are in a really good mood.
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