Why Developed Countries Maintain Such High Car Sales

by | Apr 5, 2019 | World Featured

Why Car Sales Are Still So High

Car sales are booming in developed countries around the world, especially in countries like the United States and Australia. People are buying new vehicles on a consistent basis, and it doesn’t appear that purchases are slowing down anytime soon.

This appears to exist in contrast with several factors that would hypothetically decrease the number of vehicles purchased. For example, cars are more reliable these days and tend to last longer, which should increase the amount of time between consumer purchases. Public transportation is improving in most areas and is becoming more accessible. And alternative traveling options, like bicycling, are becoming more popular.

So why is it that car sales remain so high?

Factors for High Car Sales

There are several factors pushing to keep car sales high in the developed world:

  • Consistently affordable prices. You can find a new car in Australia for an affordable price, especially if you’re looking for a basic model. The same is true in the United States. The reality is that car prices have remained relatively consistent, and in some cases have decreased over time, despite rising prices in practically every other consumer market. This is due to a variety of factors, including better manufacturing technology, more affordable materials, and competitive pressure to keep prices low. In any case, consumers have access to some incredible deals, which incentivizes them to take action.
  • The allure of the new. Consumers in capitalist societies, and across the Western world like the idea of having the latest and greatest in everything. There’s some degree of societal pressure to have new versions of everything, from the mobile device in your back pocket to the car you drive to and from work. After five years of owning your car, you may be able to get more valuable years out of it, but you may not want to—the appeal of the novelty of a new car is just too great to resist.
  • Preferences for personal vehicles. It’s been well-established that gas-guzzling personal vehicles are less than ideal for the environment. Even the most energy-efficient models among them are less fuel efficient than biking or public transportation, especially if you aren’t carpooling, yet the average consumer can’t get away from the idea that personal vehicles are more accessible and more convenient.
  • Available financing. Another factor to consider is how easy it is to get financing for a new vehicle, even if you have a low credit score. Auto lenders are more than happy to provide financing, regardless of your financial history. While this has opened the doors to new financial opportunities for millions of consumers in the developed world, there may also be some consequences to this; there are more than 7 million Americans behind on their car payments by 90 days or more, which could be a sign of a bubble forming. A similar borrowing crisis in the home mortgage industry was a major influencing factor in the 2008 Great Recession.

Where Does It Go From Here?

Do these factors have enough momentum to keep car sales high in the developed world for several years to come, or is the surge in auto sales just a temporary trend? That depends on many factors. It’s unlikely that the subjective appeal of a new car will subside; if anything, demand for new cars will likely rise as cars become more technologically sophisticated, more fuel-efficient, and safer. In big cities, where bicycle commuting and public transportation are more common, car sales may slowly start to recede. And of course, if a fleet of self-driving cars begins shuttling the general public to their destinations on a regular basis, the entire “new car” industry may change on a fundamental level.

The bigger predictor of near-future trends will be the availability of auto loans. If auto lenders continue to offer loans at reasonable rates to such a large percentage of the population, it’s a practical certainty that a high number of people will continue buying new cars. If there’s an auto loan crisis and lenders are forced to hike up rates or increase their credit standards, the trend may reverse.

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