2010 was the year of the costly used car

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Date: Sat, 15 Jan 2011 Time: 10:41 PM

If one would describe the North American economy of 2010, words like "tepid" or "blaah" would be used. It was like being in a holding cell. Waiting. Waiting. And more waiting. Most folks were hoping for an economic rebound, all the while fearing a double-dip. The USA, and much of the world with it, was in a financial holding pattern.

Like every other industry, the vehicle manufacturing and sales sectors felt this lack of anything in particular happening. But they felt it in their own unique way. People were still driving, of course, but cars just weren't flying off the lots.

In 2009, grim-talking pundits were predicting thefuneral of the North Americanvehicle manufacturing industry. By December of 2010,that idea was no longer on the table- Ford, General Motors and Chrysler all proved to be profitable in 2010, yes, even through the year of economic doldrums - but something was still missing, something that the auto sector in particular lacked. It was not eagerness to buy new cars that saved the Detroit Big Three. The fact is that sooner or later we all need new cars. The day arrives when the old car gives up the ghost and a new car is required.

Or you need a used car.

That is why the newly resuscitated auto industry had to stay in its proverbial hospital bed through 2010. Many of the "new" cars people bought, were in fact used cars that had belonged to somebody else.

The lingering aftermath of the recession included a number of new attitudes:

Frugality was and remains "in". It is now so cool to tell everyone about how little you paid for something (how smart you are to get such a good deal), not any longer how much you paid. People now take more time and more effort to search for the best bargain, to become a winner by paying less.

Playing it safe became a more important approach. Even though the recession was officially over jobs have not returned. Sure, people are spending again, but there at a higher level of unemployment. A level that continues to stagnate. In other words, with jobs being less secure, more people are being careful about making too many big expenses and going too much into debt.

The recession was, after all, about too many people spending too much more than they had. Taking out a new debt -and a car loan is a fairly substantial one, at that- just hasn't seemed as smart as it once did.

People were also biding their time Sooner or later, the economy is bound to rebound. They knew that the economy was bound to rebound, if they just waited long enough. People knew the recession would not last forever - that sooner or later bright economy times would reappear. When it does, we can all celebrate by making Detroit rich again. In the meantime, a previously owned will take us where we need to go, until the time when we can afford the risk of taking on a new car loan.

What is really different about 2010 is that there were actually moments when some used cars were selling at almost the same price as their newer counterparts. Demand for used cars made them scarcer than usual and drove up the price. Disinterest in new vehicles kept dealerships too well-stocked and kept new car prices fairly low.

Now it is time for some predictions. Pent-up demand can only be fulfilled by buying used cars from other people for a while. Cars still do wear down and reach the age of retirement. Eventually, they will have to be replaced. And even if they are replaced by newer used cars, those newer used cars won't be available if nobody replaces the aging cars with new vehicles.

So, unless we do hit another fairly major downturn in the economy, let's watch for the new car market to pick up steadily through 2011. A truly destructive recession could change that, of course, if enough people decide to go from two-car family to one car family. Or from three car family to two car family. Or if enough urban folks switch to transit to ride through the tougher times. However, as 2011 opens up, it seems unlikely this will happen.

About the Author

David Leonhardt is an Ottawa-area writer. This article about buying used and new cars was written for MonsterAuto.ca, a great place to buy your used car across Canada.

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