American car market undergoing substantial changes

Excellent article by Hilton Holloway from Autocar on the changes happening to the US vehicle market:

“Many new cars are sold to buyers at barely above their cost to the dealer, he said. Unless the dealership also has an active used car operation, new car sales are often not enough to pay the bills.

One big fear is the extent to which US car buyers have moved into leasing cars (much like the UK) since the Credit Crunch. Around 31% of new cars are sold as monthly leases and the cheap deals of recent times are running out. 

The extent to which drivers who have borrowed themselves into significant debt, finding they owe $20,000 on a car they want to dispose of but which has a $10,000 trade-in value, is also a big concern for the industry, because people with negative equity can’t and won’t go out and buy a new car.

And it’s not just disappearing consumers who could undermine the carmakers – massive market shifts are catching them out as well. GM’s recent decision to close three plants and kill 14,000 jobs was mostly a consequence of the collapse in US road car sales as the market swings decisively to crossovers and pick-up trucks. “

It sounds like a combination of factors, from alternative ways to own cars (such as leasing and subscription services), to a shift in demand to SUVs and utes, have combined to create a hurricane that is disrupting the traditional process of outright purchasing a new car through a dealership. Watch this space.