US auto buyers prefer new to old, as used market tightens

US autos Jan13.pngDecember saw continued strong volume in US auto markets, with sales (red line) at pre-Crisis levels for the month. The key driver is the need to replace ageing vehicles, but manufacturers were also generous with rebates and credit offers to help clear inventory:

• Overall, 2012 sales were up 13% versus 2011 at 14.5m
• At the same time, the average age of the US fleet hit a new record 11.1 years
• GM offered $9k rebates on some models to cut pick-up supply by 20k

This is therefore quite a different market from the 1995-2007 supercycle, when sales averaged 16m/year, and hit 17.3m at their 2000 peak.

Today, manufacturers are benefiting from the low sales seen between 2009-11, as this means the used vehicle market is much smaller than normal. Only 10.4m autos were sold in 2009, for example, so there are relatively few vehicles now available to used-car buyers. In turn, this means prices are relatively strong.

So for an average American, the attraction of a new car is much higher than normal. Manufacturers have also spotted this trend, and eased their credit conditions to ensure buyers can borrow the money required. Buyers thus effectively have a choice between a relatively high-priced used car, or an attractively priced and financed new car.

How long this trend will last is a critical question, of course. The blog will analyse this in more detail, as soon as the relevant data becomes available.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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