While US economy is starting to pick up, Americans will hold on to their cars much longer and there is lesser tendency to replace cars in 4 or 5 years, as was the practice before the recession. In the past, people replaced their cars out of luxury, but with the sluggish economy, it is expected that new car purchases will mainly be due to wear and tear and extreme vehicle damages.
Polk forecast director Anthony Pratt mentions various reasons for this development. For one, he says that most Americans have already extended paying off their loan – those who have recently completed their loan payments are less likely to sell off their cars, replace it with a newer model, and take up monthly payments.
Aside from the fact that most consumers have found it difficult to keep up with their loan payments, car prices have also gone up. Pratt believes that this change in consumer behavior is proof of the wide reaching effect of the recession.
For many years, car makers have relied on the well-established rule where Americans buy new cars in three to four years average. With the results of the new Polk study, car makers will have lesser chance of retaining customers. This in turn can lead to the slowing down of the US automobile industry – one of the few industries unaffected by the 2008 financial crisis. As sales forecast become grim, experts are saying that carmakers have to find new markets sustain its current development. Even without the recession, many believe, new car purchases will still drop especially since cars today are of better quality – they last longer, hence, there is lesser need to replace them.
In the past, the main strategy of selling cars is the “conquest buy” wherein an automobile producer had to convince a consumer to switch brands. With more customers holding on to their cars longer, the conquest buy may no longer be applicable. Moreover, Pratt says that as more people retain their cars for 5 years or more, it becomes more difficult for car designers to know the customer’s needs. As people hold on to their old cars, there is a huge possibility that their needs will change and an even bigger possibility that they will abandon the brand they have driven for years.
