Tuesday, August 3, 2010

Car sales continue to be very strong


July auto sales were up at a 21% annualized rate from last year's low. That's very strong no matter how you look at it. Another V-shaped recovery for an important sector of the economy.

9 comments:

Public Library said...

We decided to fix our existing car rather than finance a depreciating asset with debt. Americans should follow suit. At what point did we stop listening to our grandparents who purchased new cars outright?

John said...

Public,

I have been in the same situation many times. It works great for awhile but unless one is a very mechanicly inclined the garage bills will at some point exceed the car payment...not to mention the worry over being stranded by an aging vehicle. Many opt for the newer car despite the debt especially if there are young children involved. Also, higher fuel efficiency can offset some of the expense.

The average age of the nation's auto fleet is between 10 and 11 years depending on whose estimate one reads, and it is increasing. Good news for the auto companys.

Scott Grannis said...

Given the huge decline in new car sales (virtually unprecedented), I would say that quite a few people have already joined you and done the same thing. Sooner or later, however, our rapidly aging auto fleet will need to be replaced with new vehicles.

Public Library said...

John,

Both my wifes and my car are paid off. I have paid cash for my last 3 cars. Mechanic bills keep it running another 100K miles so long as we change the oil and replace the plugs!

Scott, your notion of an aging fleet is simply a theory. Cars can run for 300K miles these days. Unless something major malfunctions, people should keep what they have longer than commercials and Johns fear of safety would have you believe.

Purchasing a car with debt is a 100% mal-investment. To continue to do so every 4 years is throwing good money after bad. We should preach to our children the virtues of thrift versus the immediacy of want to keep up with the jones.

Public Library said...

If you don't have the cash to buy it, you should not be buying a darn thing unless your expectation of return is greater than the investment.

Having a flashy car and looking cool is not part of the return equation.

John said...

Public,

A car used for transportation is not an investment. It is most assuredly an expense. Also, young people should avoid unreasonable debt levels. However, where young children are involved dependable transportation is a necessity and often there is no other option but to borrow. Too often however it IS the flashy car that people want. The price of vanity is indeed high.

Benjamin said...

Public Library-

I drive a 1986 Isuzu that I bought in 1990 for $8,000. It now has 240k miles on it, and runs fine. The interior is shot, the exterior is shot. It gets so-so mileage, despite being a four-cylinder. I will drivce it until the wheels come off, perhaps literally.

I am buying farm land in Thailand.

Frozen in the North said...

Love your blog, but sure car demand has rebound, but demand today is at the same level as it was in 1981, nearly 30 years ago.

Car sales are insufficient to replace the current car stock -- sure its better than a kick in the teeth, but certainly not an indicator of a "return" to expansion

Scott Grannis said...

Frozen: it's not the level of car sales that is important (I agree that the level is abysmally low), it is the change on the margin, and that is strongly positive.