Like clockwork, from 2000 to 2007 U.S. consumers could be counted on to buy roughly 16 million new cars annually. The global recession put the brakes on that gravy train, though, and in 2009, only 10.4 million new cars were sold. Because drivers have been more inclined to repair cars rather than buy new ones during shaky economic times, sales haven’t fully rebounded. In 2011, dealerships sold 12.8 million new cars. For the year 2012, new car sales are expected to rise substantially, perhaps hitting the 14 million mark.
The National Auto Dealers Association forecasts sales of 13.945 million new cars for 2012. No one really knows how many cars will sell, of course—forecasters anticipated 12.5 million new-car sales in 2011, for example, so they were off by 300,000.
But manufacturers and dealerships are working with the assumption that 2012 will be a bigger year for sales than 2011. Accordingly, per data cited by the Detroit Free Press, auto manufacturers are making 14 million cars in the U.S. this year, up from 13.1 million in 2011.
So, could the forecasts simply be wishful thinking—blind hope that dealerships will be able to move around 14 million new cars because, coincidentally, that’s about the same number of cars being made?
Perhaps. But there’s logic behind the expected rise in sales. First off, vehicles on the road today are old. The average car or truck is nearly 11 years old. In the past, the average driver held onto a vehicle for only seven or eight years. In a survey from 2010, owners said they planned on driving their cars 50,000 more miles than their previous automobiles, and it looks like many have done just that.
So, for many of the cars still in action nowadays, it’s time (or past time) for owners to think about a replacement. Drivers could turn to a used car, but that market hit all-time high prices in the summer of 2011 and remains pricey. By comparison, many new cars appear to be decent values.
In addition to the old age of cars on the road today, NADA economist Paul Taylor points to affordable credit and aggressive sales incentives as reasons why more cars will sell in 2012:
“Lower vehicle costs for car buyers through manufacturer incentives and rebates combined with low interest rates will support stronger sales in 2012. And higher prices on used vehicles mean higher trade-in prices when shopping for a new car or truck.”
It all adds up to the strong potential for an increase in new-car sales this year.
On the other hand, the dealership association notes that “a decline in gasoline prices will also result in car buyers considering a wider range of vehicles in different segments,” but who really thinks that gas prices are going to drop? Most experts are anticipating prices of $4 a gallon by summer, if not sooner, in what could be the most expensive year ever for gas—following on the heels of what was the all-time priciest year ever for gasoline.