Americans have to eventually start buying new cars, before rust and accidents and overpriced parts cull the fleet down to a critical point.
So it would seem; but the latest news coming today from market-research firm AutoPacific suggests that the uptick might not be coming anytime soon. A big chunk of owners now think they’re in it for the long haul and holding out to buy a new car for two years or more.
The firm found that 42 percent of car owners surveyed definitely/probably will not buy or lease a new (not used) vehicle in the next 24 months. That’s up from just 22 percent last September, and up from 38 percent just last month. The steep slide in optimism is felt from the other direction as well, with those who definitely/probably will buy or lease sliding from 53 percent last September to just 35 percent this month.
Yikes. AutoPacific’s Dan Hall calls the trend “very disheartening,” and says that it highlights the deferability of an automotive purchase. “It’s not insulin,” he says, and if people aren’t feeling secure with the purchase they’ll will simply hold on to that vehicle with 70,000 miles for another couple of years. Or go for a late-model used car.
The data comes from a recent Internet survey conducted by the firm, including about 1,100 responses, all from licensed current vehicle owners. AutoPacific uses the survey as part of its sales forecasting.
But, you might say, if demand goes down and supply is still up, prices keep going down, right? Well, with all the bank woes that’s not technically how it’s panned out. Comerica, in its most recent Auto Affordability Index, which covers the last quarter of 2008 and was released back in February, pointed to a pronounced downswing in affordability—because interest rates had been rising sharply. The average vehicle price dropped just 2.4 percent, but that wasn’t nearly enough to make up for the bigger monthly payments. With some even sweeter deals in the first quarter, but with plenty of unsettling news to go around as well, we're curious to see how it compared.
Cash still rules, but for the most part only those with government jobs would be willing to part with that much in these times.
Seems like the perfect time to become a car mechanic or open a used-car lot, doesn't it? Or before Jim Cramer leads you astray, sink some money into the stock of whatever company makes those little pine-tree air fresheners.