Time to Buy a New Car?
The U.S. government has assured the world that the Great Recession is over.
As proof, the overall American Gross Domestic Product grew and the seasonally adjusted light-vehicle sales rate creeped above the 11-million mark, where it had hovered for months.
Other positive signs: The economy was upbeat enough for General Motors to pull off a successful public offering of its stock -- reducing U.S. government ownership of the company -- and Ford Motor Company was able to persuade creditors who held $2.5 billion in debt obligations to take common stock instead. Obviously, some people with cash to invest have a good feeling about the auto industry’s potential for growth and profits.
That list of positives, short as it is, gives some reason for optimism. Overall economic growth, even slow-paced growth, is better than no growth at all. The same can be said for the growth in the light-vehicle market. In overall terms, November didn’t produce as many U.S. sales as October did -- but November is a traditionally weaker month than October. Adjusted seasonally, the sales rate is finally above 12 million and has been there for two months straight. That’s a disaster within the context of the decade, but it’s also a positive sign within the context of the past three years.
The GM IPO is especially good news for the company, because it will go a long way to help GM ditch the derisive “Government Motors” tag dogging it since the bailouts. These days, Ford is the golden child of the domestic industry and one of the shining lights of the global industry, so it’s not a shock to hear that it could shed some major debt in return for an ownership stake. Year-over-year sales in the United States on a manufacturer-by-manufacturer basis were better in November 2010 than they were the previous year. All in all, it seems to foretell brighter days to come.
But because consumers still aren’t smiling, the industry isn’t smiling either. As recoveries go, the current one is about as tepid as imaginable. Yes, we’ve seen some signs of growth -- but it seems half-hearted compared to virtually every other recovery of the past century. Meanwhile, consumers who might be tempted to buy a new car see more empty showrooms, more retail space for lease, and less construction activity than most can ever remember.
If the goal is to make the United States more like Western Europe, it’s happening in at least one sense: The U.S. economy’s recent no-growth “growth rate” is more like Western Europe than ever. The Federal Reserve just revised its growth estimates for this year and next year downward -- significantly downward. Its predictions regarding the employment picture are just as dismal. The unemployment rate has been stuck at over 9.5 percent for months. While the Reserve predicts some improvement, it is not what the car business seeks. Among its predictions, the unemployment rate will be 7.5 percent at this time in 2013.
What does all of this mean? Many consumers are still on-edge. They’re saving more and living more frugally than before -- even if they are currently employed. The worry remains that they, like some people they may know, could be out of a job at any time. This is bad news for the car industry, but it might be the ideal time to buy a new car if you feel secure in your finances and are in need a new vehicle. The deals are plentiful, and dealers will welcome you with open arms.
Tom Ripley writes frequently about the auto industry, car-buying issues and the human condition from his home in Villeperce, France.
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