According to CNW Marketing Research, a well respected marketing research firm specializing in the automotive industry, Americans purchased a whopping 4 million used cars this past May. That number is staggering when you consider that the new car market in the U.S. is estimated at 9 million over the course of an entire year.
The sweeping changes taking place in the auto industry has apparently left many consumers feeling paralyzed. Will the new car maker they buy from today be in business a year from now? Will their new car warranty be honored? Will the new, fuel efficient car they buy today be considered a gas guzzler within a year? Finally, what about all the talk of hybrids and all-electric cars that appear to be just beyond the horizon? Will they make any new car purchased today obsolete?
American consumers have grown accustomed to this dilemma. Many were around to witness the demise of the Betamax format which was replaced by the VHS format, which was replaced by the laser disc, which was replaced by the DVD, which is being phased out in favor of Blu-Ray discs. You get the idea.
The analogy is fitting but flawed. From all indications, the major players in the auto industry aren’t going away. Some are being bought and sold in a piecemeal manner like cattle on the auction block, but even the federal government has gotten into the act to ensure that valid warranties are honored.
Add to that the new Auto Affordability Index just released by Comerica Bank showing that new cars, on average, are the most affordable they’ve been since the study began back in 1979.
The study, released last May, claims that new car prices are, on average, $,1,700 lower than during the fourth quarter of 2008 and more price cuts are expected due to oversupply. As the demand for new cars has dropped, supplies have increased and lead to once in a lifetime opportunities for the average car buyer to get a lot more car for their money.
The study also finds that a new car with a $26,000 MSRP now takes the average American family only 21.5 weeks of median income to purchase compared to 22.8 weeks in December 2008.
When you factor in the cost of repairs and maintenance for the average used car versus a new car under warranty, the picture becomes even clearer.
Car buying is, of course, a very personal matter, and the choice to buy a new or used car hinges on a number of factors. With new car prices this low and incentives this generous, however, the new car option should not be dismissed offhand.