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Date Posted: 11:40:37 01/28/11 Fri
Author: David Leonhardt
Author Host/IP: NoHost / 69.168.143.54
Subject: Car Sales Report for 2010

At best, we might describe 2010 as a tepid economy. We were left hanging, uncertain of what would come next. People were hoping for a rebound, but fearing a double-dip. And all that happened was that the world kept holding its breath.

And like every other sector, the auto industry felt this lack of anything happening. People were still driving, but cars weren't just flying off the lots.

Back in 2009, pundits were predicting the funeral of the North American auto industry. By the end of 2010,nobody was suggesting that anymore - Ford, Chrysler and General Motors all proved they could be profitable, even during a year of economic purgatory - but the sector could not be described as hot. It was not an enthusiasm for buying new cars that saved the Big Three. The simple truth is that people needed new cars. Sooner or later, the old car gives up the ghost and a new car is required.

Or a used car.

And that is why the newly resuscitated automotive sector had to stay in its proverbial hospital bed through 2010. Many of the new cars people bought, were in fact used cars.

The lingering results of the recession included some changed attitudes:

People found that it was hip to be cheap - oops, sorry... I mean "frugal". It is now cool to brag about how little you paid for something, not just about how much you paid. Bargain hunting became something that more people were willing to do.

Playing it safe became more important. Even though the recession was officially over jobs have not returned. Sure, people are spending again, but there at a higher level of unemployment. A level that continues to stagnate. In other words, with jobs being less secure, more people are being careful about making too many big expenses and going too much into debt.

Don't forget what the recession was about - too many people spending too much more than they had. Taking out a new debt -let's keep in mind that a car loan is a fairly big chunk of debt by most people's standards - just hasn't seemed as smart as it once did.

People were also playing a waiting game. Sooner or later, the economy is bound to rebound. They knew that the economy was bound to rebound, if they just waited long enough. People knew the recession would not last forever - that sooner or later bright economy times would reappear. When it does, we can all celebrate by making Detroit rich again. In the meantime, a used vehicle will take us where we are heading, until we can afford to take the risk on a new car loan.

The funny thing about 2010 is that there were brief moments when some used cars were selling at almost the same price as their used counterparts. Demand for used cars made them scarcer than usual and drove up the price. Disinterest in new vehicles kept dealerships too well-stocked and kept new car prices fairly low.

Time for some predictions. Pent-up demand can only be fulfilled by used cars for so long. Cars still do wear down and reach the age of retirement. And sooner or later, they will have to be replaced. And even if they are replaced by newer used cars, those newer vehicles won't be available unless somebody trades them in for a new car.

So, unless we do hit another fairly major downturn in the economy, let's watch for the new car market to pick up steadily through 2011. A truly destructive recession could change that, of course, if enough people decide to go from two-car family to one car family. Or from three car family to two car family. Or if enough urban folks switch to transit to ride through the tougher times. However, as 2011 opens up, it seems unlikely this will happen.

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