Isn't the whole idea of continual new car sales growth impossible???

[sportyaccordy]

Cars get more and more reliable by the year.

Not only that, but information on cars is so abundant, and buyers are as savvy as ever.

My questions are:

Why the F@#$@# would ANYONE buy, say, a 2009 335i, when they could get a 2008 335i for thousands less, with basically the same warrantee/roadside protection, etc.?

With more and more cars on the road each year, how do manufacturers expect continual INCREASE in demand??? ESPECIALLY with rising gas prices & a slowing economy?

I have a problem with the way the whole American economy works, but that's another thread... the automotive industry is a perfect example of a system that is built on credit and is unsustainable.

WTF???

[S204STi]

Maybe because there are more and more drivers on the road each year.

[FlatBlackCaddy]

Maybe because there are more and more drivers on the road each year.

Yup, that and the crazy notion that a automotive manufacturer attempts to gain market share from their competitors.

Also sporty where do you think all these one model year old certified used cars come from???

New car buyers?

It's a cycle, it has been increasing for decades with the population growth and continued development other countries.

[dazzleman]

It's not a sure thing to be able to get a very new used car, as in one from the past year.  Though these days, with so many cars probably being repossessed, it's probably easier than usual.  But repossession is one of the main reasons such a new car would be available for repurchase.

Failing that, used cars will be a few years old, and have some wear and tear.  But I agree, a really new used car can be a great deal.

As for constant sales growth, we have constant population growth, so it is theoretically possible.

You are right about too much being built on credit, though.  The auto manufacturers did their own version of the subprime mess with leasing, trying to pump up expensive sales by pushing actual payment further and further into the future via high residual values.  This came back to bite them when the glut of returned leased cars pushed their market values well below the residual values, and the companies took big losses.

[sparkplug]

Vehicles eventually wear out so they get replaced. A couple of years ago the average automobile in the US was ten years old. Must have a lot of vehicles in the south because if they wear up north they'd have rusted out.

A lot of people do buy vehicles on credit because they love that new car smell. It's highly addictive. And bad for you.

I bought my car with cash. Paid for with one check. So what if it was a boring 4 door sedan. I don't want an exciting car. They excite the police, who inform the insurance company who then says we need to take you entire life savings.

[hotrodalex]

I bought my car with cash. Paid for with one check.

Every car I've bought in the last 3 years has been paid for in cash.

[GoCougs]

I agree that the US auto market is seemingly irrational. The market as a whole sees value in buying that '09 335i for $45k over an identical '08 335i with 5k miles at $37k. How the market rationalizes it I'm not sure, but since inception it has, and I don't think it'll change anytime soon.

I have to admit that I "rationalized" it when I bought the Accord new off the lot. Though I only paid $23k, I could have gotten an '04 with ~10k miles for probably $17k. I wanted a specific car with specific color combos, and I couldn't find it anywhere. I also rationalized it because I planned for it, I paid cash, and I was buying far below my station.

Another point of agreement is that the industry does float on a bubble of credit. I surmise that less than 10% of new vehicles are bought outright. If credit tightens or evaporates the industry will get decimated.

[sportyaccordy]

We are already seeing tightening credit's effects on the market. And it is indeed brutal.

It's going to be a rough year in '09. I have family in new car sales business & I'm worried... but rationally, it just doesn't make sense.

[SVT666]

Why the F@#$@# would ANYONE buy, say, a 2009 335i, when they could get a 2008 335i for thousands less, with basically the same warrantee/roadside protection, etc.?

Ummm.  Because somebody has to buy it first?  I don't know, I'm a little slow......

[93JC]

No, the idea of continual new car sales growth is not impossible. I believe last year an all-time, worldwide record for new car sales was set.

Will the growth continue to be as rapid as before? Probably not, as used cars have become a great financial proposition relative to new cars, given that all cars today are built to much, much higher standards than even five years ago. In the developed world I think car sales will be fairly stagnant, and might even drop in parts of Europe depending on how hell-bent the governments are in meeting CO2 reduction targets.

India, China and other developing markets are where the majority of sales growth will be, but the problems with them are:

- the profit margins on the class of cars the population can afford is very low
- the governments tend to enforce strict local content minimums, meaning many of the cars would have to be built using overpriced or underperforming local parts and perhaps built in collaboration with a local manufacturer; again, this lowers the profit margin

The hope is that the low profit margin would be offset by the sheer number of new car sales. China and India alone are a burgeoning 3+ billion people market.

Sales in North America have been propped up by the proliferation of leases and long-term financing schemes, thus I think we will see a drop in the short term as these become more difficult for buyers to obtain.

[SVT666]

Hey Mark.  I think you contradicted yourself.  You say it's not impossible and then go on to explain why car sales will not grow for the next couple years.  Also, I think I read somewhere that Chinese car sales are down this year.

[93JC]

[sportyaccordy]

Ummm.  Because somebody has to buy it first?  I don't know, I'm a little slow......

My dad picked up a 2003 M45 brand new in 2004 with an 8K discount.