RealMoney

U.S auto sales were down 5% in December, but to me, that's actually refreshing to see. It indicates that ""year-end closeout" mania wasn't in evidence this year -- and that's good for automakers' profit margins.

It's important to remember that car companies generally don't own the auto dealerships that sell their vehicles. So, automakers actually book revenues when they produce a vehicle, not when a consumer buys it. As such, big year-end sales or rebates have never been particularly value-creating for car manufacturers or their shareholders.

Now, back in my days as a cub analyst at Donaldson, Lufkin & Jenrette, I used to spend hours poring over monthly auto-sales reports, trying to refine our earnings models for what were then the Big Three U.S. automakers. For 2017 as a whole, total U.S. vehicle sales fell 1.8% to 17.25 million units, and I ultimately believe that 2016's 17.55 million sales will turn out to be the peak for this economic cycle.

In other words, we're past auto sales' peak in terms of unit volume. But what about profitability?

Edmunds.com published an interesting set of figures this week that displayed the real cost of buying a new car. The study found that the average light vehicle's U.S. transaction price grew to $36,495 in December, up 3% from December 2016. I would attribute that to three factors:

• A lack of year-end promotions. Incentives only rose 1% year-on-year during December.

• Continued strong sales of sport utility vehicles, which on average cost more than passenger cars.

• Attractive financing terms.

That last point is the most telling one to me. According to Edmunds, the average amount that car buyers financed on that $36,495 transaction price was $32,080 -- which is also a record.

That implies a loan-to-value ratio of a whopping 87.9%. By contrast, the average loan-to-value ratio was only 87.4% in December 2012 -- and in an industry that measures margins in basis points, 2017's extra half a percentage point is significant.

Now, U.S. auto dealers have always sold cars to consumers based on the size of the monthly payment, and to ease the burden of today's higher transaction prices, finance companies are offering much longer loan terms. Per Edmunds, the average U.S. auto loan's term rose to a full 69 months this past December, up from just 64.7 months in December 2012.

Personally, I'm not sure I would recommend that anyone buy a car that takes five years and nine months to pay off, but hey, this is America and we love our leverage. Other than the 2008-2009 financial crisis, it's always worked.

But with U.S. auto loans now averaging a 4.73% annual percentage rate for interest, many consumers' car monthly payments will start to hamper their ability to purchase other things. Edmunds' data show the average monthly car payment for a vehicle sold in December 2017 was 2.9% higher than it was for the average car sold a year earlier.

Frankly, I didn't see enough wage growth in Friday's December U.S. jobs report to cover such extra spending. So, watch out for a stretched consumer -- and a bias toward Americans repairing rather than replacing vehicles in new-car market that's already passed its peak anyway.

Automaker stocks look less attractive under the scenario, although Ford (F) and General Motors (GM) could move higher in the short term on hopes for autonomous vehicles. However, aftermarket auto suppliers -- including AutoZone (AZO) , O'Reilly Automotive (ORLY) and NAPA parent Genuine Parts Co. (GPC) -- look more attractive, especially as a longer-term investment rather than a short-term trade.

In fact, GPC was my very ever recommendation long ago when I was a sell-side analyst. I think it was trading at $26 per share at the time (early 1998). compared to the $97.50 it just closed at on Friday. And I expect Genuine Parts share price to decisively break through into triple digits as we move through 2018.

Conversely, banks could lose out from a move to longer auto-loan terms and higher monthly payments. Bank of America (BAC) , Citigroup (C) , JPMorgan Chase (JPM) and Wells Fargo (WFC) all make terrific margins on car loans, but if there's any stress to the system, that will hamper profitability.

JPMorgan CEO Jamie Dimon has even used recent quarterly earnings calls to mention car loans as a potential problem for his firm. I don't expect car loans to cause another 2008 crash, but any hiccup in profitability for money-center banks that currently seem priced for perfection will likely cause price pullbacks.