The economy across North America in 2010 could, at best, be described as tepid. The recession was over, but the recovery had not yet arrived. People were hoping for a rebound, but fearing a double-dip. North America, and much of the world with it, was in a financial purgatory.The auto industry was no different.
In 2009, many people were predicting the end of the North American auto industry. By the end of 2010, nobody was suggesting that anymore (all three of the Big Three turned a profit in 2010), but the sector could not be described as hot. It was saved by pent-up demand - one way or the other, people still needed to get around. There is only so long you can put off a new car purchase.
Or a used car purchase.
And that is why the newly resuscitated auto industry had to stay in its proverbial hospital bed through 2010. Many of the new cars people bought, were in fact used cars.
The lingering results of the recession included some changed attitudes:
Frugality was and still is "in". It is now cool to brag about how little you paid for something, not just about how much you paid. Bargain hunting became something that more people were willing to do.
Playing it safe became more important. Even with a so-called recovery, jobs have not returned. Sure, people are spending again, but there at a higher level of unemployment. A level that continues to stagnate. In other words, with jobs being less secure, more people are being careful about making too many big expenses and going too much into debt.
Playing it smart became safer. The recession was, after all, about too many people spending too much more than they had. Taking out a new debt - and a car loan is a fairly substantial one, at that - just hasn't seemed as smart as it once did.
Biding time is also on the mind. Sooner of later, the economy is bound to rebound. When it does, we can all celebrate by making Detroit rich again. In the meantime, a used car can surely tide us over - just in case.
The funny thing about 2010 is that there were brief moments when some used cars were selling at almost the same price as their used counterparts. Demand for used cars made them scarcer than usual and drove up the price. Disinterest in new vehicles kept dealerships too well-stocked and kept new car prices fairly low.
Time for some predictions. Pent-up demand can only be fulfilled by used cars for so long. Cars still do wear down and reach the age of retirement. And sooner or later, they will have to be replaced. And even if they are replaced by newer used cars, those newer used cars won't be available unless somebody trades them in for a new car.
So, unless we do hit another fairly major downturn in the economy, let's watch for the new car market to pick up steadily through 2011. A truly destructive recession could change that, of course, if enough people decide to go from two-car family to one car family. Or from three car family to two car family. Or if enough urban folks switch to transit to ride through the tougher times. However, as 2011 opens up, it seems unlikely this will happen.
By David Leonhardt
Published: 1/7/2011
