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Cheap gas, new models drive auto industry’s truck dominance

2015 F-150 Marketing Campaign2015 F-150 Marketing Campaign
The 2015 F-150 truck, seen above, is being rolled out at a time when Americans are scooping up trucks and SUVs.Courtesy of Ford

Despite the perceived rise of hybrids, Teslas and SmartCars, the sales numbers reported by major auto manufacturers shows that when it comes down to it, Americans still love their trucks.

At General Motors (GM), sales of pickup trucks were up 43% for December while the overall brand was up 19%. Ford (F) trucks sales jump 4% while total sales remained flat — and this was despite the fact that the brand-new, much hyped aluminum body F-150 is just being rolled out, with production still ramping up. FCA (which stands for Fiat Chrysler Automobiles) also saw pickups dominate the sales game, with Dodge Ram trucks gaining 28% for the entirety of 2014 versus 16% overall.

Why, then, are so many car shoppers edging towards a hearty truck? A variety of reasons including gas prices, an influx of new cars and good financing options.

The impact of gas prices is hotly debated — some analysts think that, given the volatility of that market, few people see low prices at the pump and suddenly decide to go get a gas guzzler — but Jessica Caldwell, a senior analyst at Edmunds.com, thinks it can have an effect, especially for people who might be thinking about buying a truck, but are on the fence.

“Low gas prices gives them the push that they need,” she said.

Caldwell noted last month’s proportion of truck sales was the largest Edmunds has seen since December of 2005. The breakdown was 55.2% for light trucks versus 44.8% for cars for last month.

John Krafcik, president at industry website TrueCar (TRUE), agrees, saying that seeing lower numbers on the signs at gas stations can just put more people in the mood to get to a dealership.

“Lower gas prices for sure drive a larger industry,” he said. “People are more interested in buying a new car when fuel prices are low.”

Even before the recent drop in oil prices, though, trucks and sport utility vehicles were making up the lions share of the car market, gobbling up some of the space long-held by midsize sedans. This is partially because SUVs, long considered appropriate only for people looking to haul their boat or go off-road, have become very family friendly vehicles, with decent gas mileage and a fairly quiet motor. Another reason? There was just a lot to shop for.

“There’s a lot of new product out there,” said Stephen Brown, a senior director at Fitch Ratings. Brown noted specifically that Ram pickups were updated in the past few years, along with the GMC Yukon, the Chevy Tahoe and the Cadillac Escalade.

Caldwell agreed, noting that the market may have been flooded with customers who had been “holding off on that large SUV purchase for some time” but decided to take the plunge with new options available.

Finally, low interest rates could help push some customers to go for a slightly more expensive option like an SUV or a truck, both of which tend to have high average transaction prices than cars.

Brown notes that auto finance companies have already extended the loan term farther than most thought possible, from the average 36 months to the gargantuan 84 months. If interest rates were to go up, that could impact some customer’s ability to buy in more-expensive segments like pickups and SUVs.