If the economy is so bad, why are retail car sales on the climb?

Oct 15, 2012

September 2012 vehicle sales spiked – more than forecasters forecast (August sales also beat the punditry’s expectations). The vehicle sales number crunchers point to retail sales being the driver. That is, fleet sales, which dropped off in September, were more than boosted by an overall industry jump of 13%.

Still, despite the continuing growth in sales, one financial institution, Morgan Stanley, called the 14.9 million SAAR (seasonally adjusted annual rate) “dreadful,” but followed up, as reported by Jesse Snyder of Automotive News, that  “the underlying strength of the market is consumers forced to replace the aging U.S. vehicle fleet.” Well, yes, consumers DO replace aging vehicles; they just hadn’t done this as quickly until the Great Recession ended in 2010.

Gas prices, which didn’t drop as usual after the summer and, instead, rose, may have encouraged car buyers to trade in higher-gas-consumption vehicles for more fuel-efficient ones. More bank loans on cars opening up to more consumers also might have helped spur sales. And, maybe, more people getting off the unemployment rolls and earning some needed income allowed some of these folks to buy vehicles.

Moreover, forecasters predict 2013’s vehicle sales to beat 2012’s.

Truck sales, which notably slipped recently – and might remain low at least until the November elections are over – are expected to pick up some through the fourth quarter of this year. TrueCar.com analyst Jesse Toprak said, “Trucks are hurt by lingering high fuel costs. Small cars are remarkably strong, but trucks are weak.” Tropak also said, “Truck sales are based on prospects of business growing. Maybe the deals are not that great on trucks and, so, buyers are waiting. We’ll probably see more incentives in the fourth quarter as is typical.”

So, despite a slowly recovering economy, buyers have continued to return to the showrooms to spend on large-ticket items.

I favored the GM and Chrysler bailouts almost four years ago by Presidents Bush and Obama; it was the right and necessary thing to do to stanch the flow of our economic blood draining from our then seriously anemic economy. I’m still undecided about the overall effect of 2009’s “Cash for Clunkers,” even though people did buy cars and trucks that summer and fall.

But I can’t help thinking that if the economy is so bad now, why do vehicle sales just keep growing?