The Car Sales Boom of 2015

                  According to an article in the Aug 5, 2012 issue of The New York Times Magazine, auto makers are betting that 2015 will be an all time record sales year.  According to Adam Davidson’s article, 2015 IS GONNA BE THE YEAR, Volkswagen just opened a new plant in Chattanooga, Honda is expanding production in Indiana, Kia in Georgia, and Hyundai in Alabama.  Why do they think a boom is coming? Do they suspect that we will all be rolling in money then?  No, they just think that income and consumer confidence are slowly improving and will continue to improve.  But mainly, they think that most of the current fleet of American cars will be un-repairable by 2015.   Today, the average American car is 11 years old.  That’s an all time record. And if 11 years is the average age, then millions of cars must be much, much older than 11 years--and sooner or later, all things die. 

                  Right now, there is enough cash and unused credit in the economy to support a much higher level of consumer spending than we are seeing.  While 10% of the work force is still unemployed and another 10% is underemployed, we can assume that 80% are still earning a paycheck--but aren’t spending much of it.   For the last three years, they have been paying down their credit card debt, making payments on their houses (so that they now have equity), and some of them are saving cash.  Most of them now have good enough credit so that they could drive home a new car at any time—but they are too scared to do it.  But when their old junker finally dies, they will certainly have to buy something.  So, can’t they just buy another old car?   From whom?  This time, when your old junker bites the dust, most of the other old cars will be ready to junk too. 

                  For those who would never consider buying a brand new vehicle, the demand  in 2015 will be for used, low mileage cars. In order to fill that future demand, auto makers are now offering attractive rental deals, figuring that in three years, there will be a strong market for the rentals being returned at that time.  

                  To me, the really amazing thing is that the average American car has been on the road for 11 years.  In the 1950s, people who bought new cars traded every two or three years. Those who bought used cars bought these trade-ins and kept them for another two or three years. When I got out of high school in 1957 and got my first job, I immediately bought my first car.  It was a 1950 Plymouth Business Coupe.  It was 7 years old, had 40,000 miles on the clock, and the body was in flawless condition.  I paid $160 for it.   A dollar then was worth a lot more than a dollar today, but that still wasn’t a lot of money.  It was about two weeks pay.  I remember marveling that it was possible to buy a car that still looked and drove like a new car--for only two weeks pay.  Someone replied, “Yes, but who would want to be seen driving a 7 year old car?”