All Hail The Pent-Up Demand

by Bertel Schmitt

December 5th, 2011 1:58 PM

The long-awaited pent-up demand is finally here, and it’s here to last – at least into the first quarter of 2012, says Edmunds.com. A “mini-bubble” of new car sales has been identified, and it could make for a good start of 2012 say the car-counters of Edmunds.

Edmunds.com estimates that consumers deferred 300,000 potential new car purchases over the summer. An estimated one-third – or 100,000 – of those deferred buyers have already returned to the market. Another 100,000 purchases should return to the market by March 2012. The fate of the remaining 100,000 deferred purchases, though, is a little more unclear.

“The exact number of remaining sales that will return – and their exact pace – depends on economic conditions, since some portion of buyers likely have been deterred by current economic uncertainty,” says Edmunds.com Chief Economist Lacey Plache.

#BertelSchmitt #Sales

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Ron on Dec 05, 2011

Of course there is pent-up demand. Maryann Keller, a famous auto analyst, once quipped, "I have pent-up demand for an emerald. And my husband will make sure that it remains pent-up."

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- George B on Dec 05, 2011
  
  Ron, the difference is a car is a necessary tool for life for most Americans. Wouldn't be surprised if many consumers shift from near-luxury brands to more basic transportation, but eventually Americans will buy replacement cars as old ones wear out. With the insane high prices for used cars, I would also expect proportionally more new cars to be sold in the next few years.
  
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- Ron on Dec 05, 2011
  
  @George B Good point. Historically high used car prices will motivate some people to buy new rather than used. However, that new car purchase "creates" another used car on the market, reducing used car prices, motivating someone else to buy used rather than new. Incidentally, I don't dispute that there is pent-up demand. Eventually Maryann's husband did buy her that emerald!
  
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- Jmo on Dec 05, 2011
  @George B However, that new car purchase “creates” another used car on the market, reducing used car prices, True, but not for those $1500 cars that need $2000 worth or repairs, who just get sent to the crusher.
  
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- Carbiz on Dec 06, 2011
  
  Maryann Keller? LOL. I bought her book 5 or 6 years ago. I got through maybe one chapter and I literally through it down the chute. I'd rather read the Toronto Star for accuracy and objectivity.
  
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- Volt 230 on Dec 06, 2011
  
  This reminds me of the "Cast Away" movie, Tom Hanks had years of pent-up and then he gets to go home and the wife is not available, in this case lack of money is the culprit.
  
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Zerofoo on Dec 05, 2011

I'll believe this when I hear corporations have pent-up demand for employees. This is not rocket science. People buy cars and houses when they have good long-term prospects for jobs. Without a long significant decline in unemployment/underemployment, we will not see a recovery in the auto or housing market.

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- Bikegoesbaa on Dec 05, 2011
  
  Corporations do have pent-up demand for employees. How could they not? Since the party ended in 2008 most large employers have cut way back on hiring and many have been actively reducing payrolls through buyouts or layoffs. Fewer people taking care of the same workload is the definition of pent-up demand. Many companies have been running what amounts to a skeleton crew for the last few years, but are being very careful about adding to it until they get more confidence in the economy. So the demand is there, but the willingness to aggressively reduce it is not. Really, I expect that ~9% unemployment is pretty much the new normal and will stay that way for a long time. Remember the bottom 10% of your high school class? Would you want to hire them? Well, neither does anybody else.
  
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- Andy D on Dec 05, 2011
  
  @bikegoesbaa Hey, wade a minnit, I resemble that. The bottom 10%. My mother told the principal that if he did not graduate me, that I would just be back in the fall. I'm gonna postulate that due to the way that %age is is counted, that there is at least twice that many jobless.
  
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- Jmo on Dec 05, 2011
  I’ll believe this when I hear corporations have pent-up demand for employees. They do, for skilled employees - a petroleum engineer in Houston or a (decent) software developer in Boston etc. will be getting several head hunter calls a week.
  
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- Bikegoesbaa on Dec 05, 2011
  
  @jmo Agreed. I'm an engineer, as are most of my friends - in a wide variety of disciplines. Right now we all are fielding calls from headhunters and pretty much have our pick of jobs and locations nationwide. I'm sure it won't last forever, but for now it appears that large technical employers are actively trying to (re)build their skilled talent pool. They pretty much have to, as a 3-year fear-fest of "never hire anybody and fire as many people as possible" creates a lot of openings, and it's not possible to maintain a siege mentality indefinitely.
  
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SilverHawk on Dec 05, 2011

With the world economy seemingly at the precipice, it's easy to dismiss Edmond's estimates. This cautious mood is also reflected in the statements of many auto CEOs. But, in fact, there is a general feeling of optimism throughout the industry sales forces that, at least in the short term, consumers will return to the showrooms. This is reflected in the amounts being spent on advertising in the 4th quarter. Even notorious non-spenders like Suzuki are running adds. This spending will continue into the 1st quarter of 2012 to coincide with many new model releases coming in the Spring. How long the mini-demand lasts is, of course, dependent on consumer confidence which can fluctuate from week to week. But for the time being, the mini-bubble is being treated as the real deal.

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Wheatridger on Dec 06, 2011

I'm buying a used car tomorrow. Glad I'm not the only one doing that, or I'd feel like a fool.

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- MrWhopee on Dec 06, 2011
  
  But all those people buying used cars tomorrow drive the price up... If there are a lot of people interested in that nice used cars you wanted, the seller's gonna play hard to get and demand top dollar. I think if I'm buying something I'd rather have no one else doing the same so the seller would be more likely to give to my demands...
  
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