Publisher's Statement - March 2012
An aging American vehicle fleet, now averaging more than 10 years old, spurred stellar parts sales last year. Consumers’ efforts to maintain their aging vehicles point to more of the same in 2012.
Shop owners’ investments in equipment and training, however, are aimed at the modern fleet entering the repair cycle, more so than the aging fleet. The modern fleet is about to undergo a significant shift.
Vehicle mix, age, and make in bays will continue to change during the next couple years. As Lang Marketing Resources reported, foreign nameplates sold during the 2007 to 2011 economic downturn, coupled with diminished domestic car sales, will result in a huge, nine-million-vehicle swing in vehicle type within the service industry during the next few years. The swing will result in a $5 billion shift in DIFM service to foreign nameplate vehicles, according to Lang.
As recyclers continue to warn, ever since U.S. insurance auctions opened to international buyers, it is estimated that 40 percent of auctioned vehicles are being exported out of the U.S. Cash for Clunkers may be a thing of the past, but the trend to rid the fleet of older vehicles and replace them with new ones will continue, whether under the guise of “green” or not. The industry will need to stay active and alert in order to protect the domestic fleet from being diminished too rapidly.
Financing: a fleet game-changer
After last year’s 10-percent increase in new car sales, experts are estimating another 10-percent increase to 14 million cars sold in 2012. Although some of that increase remains in the dealer lots as overstock, the sales increases are for real.
U.S. Federal Reserve Chairman Ben Bernanke said, “0-percent” prime is here for another three years. A confidence game of sorts, the low-cost financing through big banks and in-house loan companies will fuel new car sales intended to spearhead domestic manufacturing and, subsequently, contribute to an economic turnaround.
The low-interest, targeted credit expansion — similar to previous credit-driven expansions — creates a bubble likely to burst. Experian recently estimated that 45 percent of new car loans are “sub-prime” or close. The potential in an uncertain economy for repossession is high. The current and continuing high cost of previously owned vehicles will supposedly help cover the cost of loan defaults.
If so, expect the average age of the American vehicle fleet to drop substantially for two reasons. Not only will the existing fleet be purposely and actively reduced, but the infusion of easily financed vehicles will fill pent-up demand. Anticipate the used car fleet to be increasingly populated with “repos” and off-lease vehicles. If the trends continue, a flood of new and leased vehicles will rapidly replace older vehicles, resulting in a younger used car supply and overall fleet age.
Be Car Care Aware celebrates 10th anniversary
Celebrating the 10th anniversary of its Be Car Care Aware consumer education campaign, the Car Care Council (CCC) unveiled its new, consumer-driven website. The new site is a partnership with Driverside.com and will provide consumers with maintenance reminders.
“There’s never been a better time for the industry to get involved in this dynamic, successful, and collaborative campaign, as we begin the roll out of new initiatives for 2012,” Rich White, executive director of CCC, said.
April is national Be Car Care Aware month. Learn more at www.carcare.org.