Newly rising car prices: Will they affect your aftermarket business?

May 11, 2012

After the vehicle sales famine of 2008-2010, consumers began to return to the car lots. As the economy moved upward after the Great Recession, as more people found jobs and as consumers felt it was time to take a chance and begin spending again, car and truck sales rose month over month.

2011 was a turnaround year for the auto industry and the aftermarket followed suit. That continued into the 1st quarter of 2012. automakers and their car dealers began reporting record profits.

Then prices began to rise, with the average tag on a new car up nearly 7% from a year ago. Moreover, with monthly auto sales for the most part continuing to top each previous month -” certainly besting year-ago numbers and beating even the most analytical analysts’ analyses -” spiffs, or incentives, from the automakers also began to decrease. Even before the economy began its nosedive in 2007, manufacturer discounts could be 15%-20%; “now it’s 5%,” said Jesse Toprak, vice president of industry trends at online research firm TrueCar.com.

So, with lower manufacturer incentives, higher vehicle prices, more used cars filling once-depleted dealer lots and still-low interest rates used to attract consumers (with a rise in subprime borrowers), after starving for a couple of years, are the automakers too quickly gorging themselves on high-fat consumer dollars in the short run, rather than having a steady, healthy diet of value-priced dollars over the long run? In other words, trying to get too much from the consumer?

And will this seemingly sudden jump in prices and lack of spiffs find consumers (who aren’t seeing corresponding increases in their paychecks) with too little discretionary income to buy aftermarket products, or even find car buyers turned off by the higher pricetags of trucks, cars and SUVs?

Could the rise in prices backfire so much that it hurts our aftermarket businesses before summer’s end and into 2013?