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Auto Makers Poised for Best Year Since '07, JD Power Says

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The U.S. auto industry is poised to show the best year since 2007, J.D. Power and Associates-LMC Automotive said on Thursday, and raised their 2012 U.S. auto sales forecast to 14 million vehicles, up from 13.8 million vehicles.

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The consultants, which together issue auto sales forecasts, said the annual outlook was raised largely because there were no signs that the lagging European economy was holding back U.S. sales.

Auto sales in 2011 were 12.8 million vehicles, a figure held back by the March earthquake and tsunami in Japan and to a lesser degree, October flooding in Thailand.

Automakers will report February U.S. auto sales on March 1.

A rebound in leasing, more available credit and long-term financing as well as pent-up demand caused the rise in the forecast, the consultant firms said.

Six-year auto loans on new vehicles now account for 23 percent of retail sales, up from 19 percent a year ago. The longer loans reduce monthly payments as a way to entice wary consumers.

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February auto sales are seen finishing at 1.06 million vehicles, up 3 percent from a year ago, for a seasonally adjusted annualized selling rate of 14 million vehicles, the consultants said.

January auto sales were surprisingly robust, showing a seasonally adjusted annualized rate of 14.1 million vehicles.

"The auto industry is currently well positioned for the best performance since 2007 and is expected to approach full recovery in the next two years with total light-vehicle sales at 16 million units by 2014," said Jeff Schuster, senior vice president of forecasting at LMC Automotive.

For the decade until 2007, U.S. auto sales averaged nearly 17 million annually, but slipped in 2008 as the economic recession began to bite, helping lead to the 2009 government-sponsored industry bailout and bankruptcies of General Motors and Chrysler.

Sales slipped to 13.2 million in 2008 and then 10.4 million in 2009, when sales were the lowest since World War Two, adjusted for population growth.

Automakers from global and U.S. No. 1 General Motors Co to smaller manufacturers have each lowered their break-even points for profitability and have vowed to remain vigilant as the U.S. auto industry returns to what is considered normal sales levels of more than 16 million vehicles annually.

The consultants also raised their North American auto production forecast to 14 million vehicles in 2012, up from 13.8 million vehicles.