Why Car Sales Are No Sign of Recovery
Cars sales may best represent the recovery of the consumer economy. People who can spend $20,000, $30,000 or even $40,000 must have confidence in their prospects. Otherwise, why take on such a large burden that for many people is second…
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Cars sold in American have higher quality and dependability than ever before, at least based on information from JD Power, the gold standard of auto research. Manufacturers have undermined their old replacement cycles. Vehicles once were less durable and often were traded in after two or three years. Those cars, then sold used, still had a relatively short life span. The average amount of time a car spent in use, on average, was only eight years in 1995. Now that figure is 10.8 years.
A car cannot run well forever, and many analysts believe that once a vehicle is a decade old and has over 100,000 miles of use, that wear starts to become expensive. At some point, it is cheaper to buy a vehicle with a warranty and an odometer on zero than to make hundreds or thousands of dollars in repairs. This is particularly so given the aggressive sales tactics used by many manufacturers. Many cars sold recently are probably part of a new replacement cycle.
Several car companies currently offer zero-percent financing for as many as 72 months on new vehicles. General Motors (NYSE: GM) offers zero-percent financing for 60 months on new Cadillac CTS sedans. The model has been fairly popular, which begs the question why Cadillac has to offer the incentive at all.
Car sales may be strong and could remain so for the balance of the year. But the trend offers little offset most other economic indicators, such as overall consumer confidence, retail sales and employment.
Douglas A. McIntyre
Contact [email protected] for any questions or corrections.
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
