Skip to comments.Auto sales close to hitting the brakes
Posted on 07/02/2014 3:29:01 PM PDT by Lorianne
America's auto industry, in the midst of a five-year run where sales have rebounded more than 55 percent, is close to seeing a slowdown according to a new study.
The AlixPartners 2014 Automotive Study suggests sales of cars and trucks in the U.S. will hit a peak this year and then gradually pull back.
Read More GM announces 6 new recalls, 7.6 million cars in the US
"This is a cyclical industry and we think this current cycle has just about run its course," said Mark Wakefield of AlixPartners. "We're a little less optimistic than others about the demand for new vehicles staying this strong."
For 2015, AlixPartners estimates U.S. Will peak at 16.7 million before gradually starting to pull back.
Interest rate concerns
A primary reason new vehicle sales are poised to slow down, according to the new study, is the expectation of rising interest rates.
"We're living in an unusually calm world for interest rates," said Wakefield. "We believe the Fed will start to raise rates and when that happens, interest rates for auto loans will also go up."
As a result, Wakefield believes the purchasing power for potential car and truck buyers will diminish.
(Excerpt) Read more at cnbc.com ...
How much of a price increase is happening with today’s cars versus 5 years ago.
Younger family members have priced later model replacement vehicles for their 5 year and old vehicles.
The increased costs are outrageous. Non are buying a new vehicle. The increased costs coupled with Obozo care costs make a new car a no go.
So they are getting their used cars serviced at Big O and other non auto company service areas. They will be driving their cars longer until the prices on comparable new cars come down.
“GM is dead and Osama is recalled”
Anecdotal evidence: I drove past a marshaling yard next to the Chevrolet/GMC full size truck assembly plant in Flint yesterday. It was packed to the rafters. FWIW.
I just bought my husband a 4-wheel drive 1994 PU for 4K for a farm truck, it looks almost new. We could have gotten him a new one for 40K and kept it for 15 years or we can buy these used ones and use them on the farm 2 or 3 years and save money and not worry about them getting dirty and greasy.
I bought a 2001 Rodeo 7 years ago for 3.5K and it’s still going, that’s $500 a year, most people I know pay more than that a month.
I also got a minivan the same year on a trade with my brother, my DIL commuted 140 miles a day for 4 years and I still drive it too.
The only reason I would consider getting a new car is if the gas mileage was really great but the money I’d save on gas would be a lot less than I’d spend on the initial purchase.
I had a friend who had a perfectly good PU that was paid for and wanted to save on gas so she took on a $400 a month payment to maybe save $50 a month.
It just doesn’t make sense to me especially since I don’t care to keep up with Joneses, I just need something to get me there and back again in comfort.
I think the problem is I have a job, pay my bills and support my family. I don't have the luxury of sitting on my arse collecting "free money" so I can buy a new car, and rims.
The AVERAGE fleet age in the US is 11+ yrs old now, and getting older fast.
Company trucks must be replaced, but without credit-criminal financing, like what Ally has been doing for 4 years, most average folks are keeping cars MUCH longer than in the past.
Sorry, there is no way in h*ll I can justify spending $45G’s for a new sedan, when my older car runs just fine.
We have finally reached the point where even engine replacements on older cars are more cost effective than buying new.
Lets put things into perspective a bit however, “cash for clunkers’ damn near wiped out the secondary market (perfectly good cars destroyed). Where we’re people going to get cars? Now it sounds more like the secondary market is rebounding and new sales are going to slump.
Ours was 11 yrs old with 187k miles, didn’t trust its continued use and wasn’t worth any major $ being put into it. Bought a used murano will drive it to the 200k frame as well. New cars are just way over priced.
I bought my beater about 6 years ago for $5000 cash. The car was only about 6 years old.
Today, the same year and model with the same models on my beater sells for MORE than I paid for it 6 years ago. I’ve seen the same thing for other cars.
I just bought my wife a 2013 Lincoln MKX. I am still driving a 2008 Shelby GT500 with just under 30k miles.
Still driving my 2005 Acura TL with 250k. Runs great. They’ll have to yank the steering wheel FMCDHs.
In before ‘bring jobs back now...’
Average age of cars on the road is over 11 years, or 3 years older than they were 20 years ago.
Cars do stay in good shape longer today, but seven year loans and the large numbers of the relatively wealthy might seem to indicate steady, rather than declining, new car sales.
On the other hand, if Democrats get their wish, lots of new high-mpg vehicles will be sold, resulting in sales growth. The Ford Focus will become the family car of choice (as in Europe) instead of the Fusion.
Your friendly Goldman Sachs people are bundling the paper and selling them, just the way they did with those wonderful mortgage derivatives.
Henry Ford used to say "I take my hat off whenever an Alfa Romeo goes by." Me, I throw mine down in a rage whenever a $40,000 Ford goes by.
No, there ain't gonna be no cars in the future. The model is "Collective Transportation." Soros is bettin'bout a billion on the "Uber" concept. It's a Third World version of minibuses. Cram in, give the driver of the electric vehicle a buck, get off somewhere near (hopefully) your estinmation, walk the rest.
$10 gas? Good for the obese peasants! Very Green, you know.
Must be time for “cash for clunkers”
I wasn’t aware of GS gearing up with the 7 year flivvers.
Wait until the warranties expire on these 7 year wonders, and the owners just walk away from the car. Or they drive their used car to dealers and leave it.
“Grampa Dave, the $35,000, 7-year loan flivvers are the next derivative scam.
Your friendly Goldman Sachs people are bundling the paper and selling them, just the way they did with those wonderful mortgage derivatives.”
You are doing a great job re your used vehicles.
“I had a friend who had a perfectly good PU that was paid for and wanted to save on gas so she took on a $400 a month payment to maybe save $50 a month.”
We see idiots like the one you described above all the time in Californicator land. They wonder why they are broke with their new car payments, new I phone and its full service plan. Very few of them have any money left over for anything after their monthly car and I Phone payment.
Thanks for answering my question above re the high costs and lack of sales to anyone with half of a brain as Rush would say.
“Sorry, there is no way in h*ll I can justify spending $45Gs for a new sedan, when my older car runs just fine.”
Thanks for the feedback.
If you are young and upwardly mobile, a seven year loan is security. The budgeted auto ownership expense is known and can be covered. As wages/salaries rise to inflation or merit or both, the ownership expense remains constant and a decreasing fraction of the total expense.
The low interest means that the inflation is money made and no subtraction need be made for the cost of interest. The inflation rate becomes earnings. The intrinsic value of the car might not depreciate at a rate greater than the compounded inflation. We read here of at least one vehicle that has maintained or possibly exceeded the depreciated used car purchase price.
Rationalization? Perhaps but it points to a different view if you are not old, curmudgeonly and tight. Left out of all the equations is pride of ownership. Owning a new car provides great satisfaction.
Anyway...... there is a different point of view
After Bubba totals out the $45,000 Hyundai SUV (I ain't kiddin') with 6.5 years left on the loan, and Achmed buys the salvage title from Progressive, patches the thing up on his frame-stretcher and paints it red, (after cleaning the blood off the Genuine Leather upholstery and making sure the USB port works,) wholesales it for $3500 on his shylock's floorplan to Wayne's Buy-Here-Pay-Here, who flogs it to Betty for $7995 on the never-never, our wonderful financial people will have potentially created three more derivatives.
Of course, the engine blows after this and Betty stops paying because with no car, she loses her job. But not to worry. A gay African POTUS will surface to guide us out of the quagmire. Allah The All-Wise will handle it. Perhaps with Chinese money?
I drive an 2001 Ranger with 131 K miles. I’ll drive it until I don’t trust it anymore, simply must have reliable transportation here in Montana.
Last new vehicle was a 2009 Rav 4. That was a replacement for a 1991 4 Runner with 183 K miles on it. Would still have the 4 Runner but something electrical happened to it and nobody could chase down the problem and fix it. I traded it in on the Rav 4 and saw it for sale three times in the next 6 months. Looks like I got rid of it just in time.
Finance professor taught me years ago that transportation from A to B is what vehicles are for. You shouldn’t be paying to haul your ego around. That lesson has served me well over the years.
Your story ... which by now I have heard coupla hundred times ... really chaps my hide. With cars just full of electrics, electronics, computers, sensors, etc. ad nauseam, one would think they could add E-Z-to-use read out ports for complete diagnostics on every circuit, not just the engine. Wiring ... it's just so 19th C .... . Instead of surrounding me with airbags, spend 25¢ more on wiring diagnostics.
Just fixed a wiring problem for a friend on a late 80s Benz. Mice!
If the only way they can buy a car is to take out a 7 or 8 year loan, they probably can't afford it even at these low interest rates. Unless they put a healthy down payment on the car, the car is going to be worth less than is owed until the day its paid off. If one is disciplined and wants to use the low interest rates to manage cash flow, I'd say go for it.
You are correct...... however the payment per month is of very significant import
I have several young and upperly mobile relatives, and they drive older cars than my wife and I do and their parents. Often they end up with the parents old vehicles by their choice.
They take pride in their kids and families not a pos costing $40-50k with high insurance rates. Many are paying high tutitions for private schools for their children.
My 2007 Honda Ridgeline would be considered a new vehicle by them. In fact many have asked to be on the list to buy it, if I should decide on something else in the next few years. I had a similiar list for my OJ Simpson Bronco before the Ridgeline came along.
Most of them, their parents and we have older tvs and often Trac Cell Phones instead of the latest I phone. Three of these guys were given new I Phones by their companies and told to use them. My wife still has a Princess cell phone in our bedroom, because it works when the power goes off due to a storm or downed power pole.
I guess in a way, we are un American because of our non consumerism ways.
Thanks for the BOL of the day.