By on December 14, 2008

Many have been guessing what annual U.S. car sales would amount to this year. Some confused souls predicted sales as low as 10m. J.D.Power now has the pretty firm conviction that the year will end with 13.2m light vehicles sold for the year in the United States, down 18.5 percent from 16.2m in 2007, says the Automotive News (sub) who received an e-mail from J.D.Power. However, the big slump happened in the last 4 months. For the last 4 months, monthly sales were under 1 million. Total light-vehicle unit sales will hit 870,000 this month, down 37 percent from December 2007. Now THAT’S bad. That puts the seasonally adjusted annual rate to 10 million light vehicles in December, down from 10.3 million in November. Now THAT’S even worse. The rate had not fallen to 10 million since October 1982. Meaning: The worst is yet ahead. If the non-buying trend continues, the confused souls will be right next year and we could see only 10m units sold in 2009. China wanted to sell 10m units in 2008, a target they will not reach. With a little luck, and an economic stimulus program that works, China could make the target next year and, horror of horrors, turn into the world’s largest auto market.

PS: According to the China Association of Automobile Manufacturers (CAAM), Chinese auto makers produced about 8.7m automobiles and sold more than 8.6m from January to November. They will close out the year in the mid 9m.

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18 Comments on “U.S. Car Sales: The Unlucky Number Will Be 13...”

  • avatar
    tesla deathwatcher

    Scary, isn’t it. I wonder why people are not buying cars. Is it really that they cannot get credit? Or do they want to keep their money, fearing layoffs?

    I haven’t bought a car since 2003, and don’t plan to for another couple of years. Most people are probably like me — a new car is a need that can easily be put off for a year or two in turbulent times.

    I’ve heard that Japan’s new car market has been shrinking for a few years now as the people get older and wages do not keep up with costs. Aren’t US sales figures also generally on a downward trend for the past few years?

  • avatar

    @tesla – I think people aren’t buying cars mainly because they don’t need them. I think it was here on TTAC that someone reported that in about 10 years time or so, during the era of easy credit, the number of cars in the US went from 0.7 per registered driver to 1.1 per registered driver. So now there are really more cars than drivers and with credit non existent or expensive to get, there’s not real push to buy a car.

  • avatar

    People aren’t buying cars because they are too expensive.

    Needing credit is another way of saying you can’t afford to buy it. Not being able to get credit is another way of saying you can no longer pretend to afford it.

    Thirty years ago the typical finance was 24-36 months. Now 72 months is not untypical.

    Once real, not fake, discounts come down, you’ll see more cars selling.

    This is only economics 101.

  • avatar
    counting cars

    maybe its time to start the toyota deathwatch too.?

  • avatar

    counting cars… since GM would love it if it was only losing 1.1 billon a week… probably not

  • avatar

    @ Bertel

    Where do Automotive News get their forecast data? I thought they did their own research. Last month you could download a PDF with North American Light Vehicle SAAR for Dec 2008 showing an UPTICK! Overlaid was Dec 07 which was a massive decline. What’s that all about…. Maybe that’s the data GM use.

    @ tesla

    In hearings, Dr Jeffrey Sachs said the last couple of bubble years of car buying will probably be a “bring forward” of about 2 years! 2 above average peak years 06/07 and two shockers in 08/09. Maybe that should be 2010 the way things are headed.

  • avatar

    New car and light truck sales in the US topped 16 million units for 9 straight years (1999-2007) and exceeded 17 million in at least 2 of those years (2000-01, if I remember correctly).

    The ONLY other time in US history that sales were above 16 million was in 1986, so it seems a retrenchment over the next few years is inevitable. With the recession, people will put off buying new cars, and with all the millions sold over the last decade, there will be plenty of nice used cars available for those who MUST replace a vehicle (say because of total loss in a crash).

    However, our population continues to grow, and there will be more drivers in the future, so new car sales will someday exceed 16 million again.

  • avatar

    tesla deathwatcher the banks have gone from one extreme to the next. I went to them recently to get a line of credit against the equity of my home (there’s more than enough of the latter to cover the former) and they wouldn’t even lend me a penny. And I have great credit. Anyone with remotely tarnished credit hasn’t a prayer.

  • avatar

    Ronin nailed it. Cars simply cost too much. A basic mid range car is in the $20-$30k range. Who has $25k laying around in their saving account? How many people can afford such a hit on their budget?

    Even using an old fashion, 20% down, 4 year financing, for a $25k car is about $500 a month… a lot of money for wheels after coughing up a $10k cash down payment.

    I know there is no way I could afford it, now, or in the foreseeable future.

  • avatar

    We could very easily retrench to 8 million new units. Or less.

    Stockpiles of new cars are huge. The used car market is getting deep too.

    As more and more jobs are eliminated, people will be flooding the market with those extra used cars they either don’t need, or can’t afford to keep.

    Prices on the used market will decline even more precipitously. Those who really *have* to replace a vehicle still will. But for the most part they will be looking at a really cheap, really nice, used car. And buying it.

  • avatar
    tesla deathwatcher

    8 million new units. Ouch. What’s manufacturing capacity? I’m pretty sure it’s over 20 million new units.

  • avatar

    counting cars :
    December 14th, 2008 at 5:39 pm

    maybe its time to start the toyota deathwatch too.?

    Toyota can weather this storm with petty cash lying around in a desk drawer. GM and Chrysler are selling off the furniture.

  • avatar

    The same thing happened to the car market that happened to the housing market – people who had absolutely no business getting a loan, did, and they bid up demand and prices.
    Now, it seems, 750-850k cars per month is about right. I still want to know, in the past month, WHO are the 750,000 people who buy a car?! Did they all pay cash?
    Average car prices cannot continue to exceed average salaries, or else 72 month “mortgages” for cars will remain necessary.

  • avatar

    Many on this site claim that cars of today last longer than in the past so car prices could be a higher compared to salaries then in the past

  • avatar

    The current sales are easily explained. The auto companies flooded the market with over supply of vehicles for several years, and now a recession is keeping them from continuing the practice.

    Once again, none of this is from a single mistake. In aviation, when you get yourself killed by unexpected circumstance, you can still get blamed for the accident. That’s because you are suppose to plan ahead, and because the accidents aren’t just caused by a single event. Everything is about redundancy and contingency. When people die in a plane crash, or gigantic institutions fail, it’s not JUST because of circumstance, it’s because the circumstance combines with other mistakes to overwhelm the crew.

    I would also say that based on VALUE, not price, modern cars are positively cheap. If you spent 15k in the eighties, you did not get what 15k gets you today as far as power, build quality, safety, and reliability. Cars are CHEAPER today.

  • avatar

    I think I’m with ronin on this one.

    Huge, 72 month loans with no down payment are for people who fail at math. Keep your car another year or five, and that nets you a 100% savings on the cost of a new car.

    Or, if you really want to waste your money, save it up and buy the car you can afford, and save 15 or 20% on the cost of the car, versus financing it. Seems obvious to me.

  • avatar

    Cars are much cheaper per mile now than they were in the ’70s when you could expect that after you made that 36th and final payment you’d be lucky to get a “free year” before incurring some $300+ (in less-inflated 1970s $) repair. Most common was an entire exhaust system if you lived in the Rust Belt.

    Didn’t matter if it was Japanese, European, or domestic. Compared to domestics Japanese and the Europeans had more troubles with premature rust and electrical than with mechanicals. But nearly every vehicle cost you the equivalent of
    6 new-car payments between the 36th and 60th month of ownership which is why many people got rid of them in 3-4 years.

    My ’97 Ranger has cost me approx. $300 in repairs other than belts, hoses, tires and other “normal-wear” items over an 11-year period.
    I still have the entire original exhaust system.
    All of these above-mentioned rubber wear items last longer than they did 30 year ago, as well.

    If one kept a ’72 Ford pickup til ’83, he’d have averaged at least $300 PER YEAR in such repairs. I know, because I did just that. The average 11 year old vehicle in 2008 looks and drives a lot nicer than the average 10 year old vehicle did in 1983.

    The car market will take a long time to work so many perfectly-good 1-10 year-old vehicles through it without government intervention such as tax credits for new car purchases, sky-high gas taxes to get still-good but gas-thirsty big SUVs to the junkyard early, etc.

  • avatar

    I bought a new Honda in October as an additional car to my household. Credit was easily available through my credit union. Honda also offered a competitive loan.

    I will always want to buy a new car over used. My next new car purchase is probably three years out when I’ll want to replace one of my current Jeeps with a new model. I’d like that to be a Grand Cherokee if whoever owns Jeeps at that time still makes it? That will be true even if gas is in the $5/ gal. range again.

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