In 2010, Used Cars Ruled the Roost

2010 was a null year. There was neither bad news nor good news in the economy. No recession any more - no recovery yet. The world was on pins and needles, praying for an economic rebound...or fearing a double-dip recession. Would the recession rear its ugly head again? Or would the world roar back to the good times? And all that happened was that the world kept holding its breath.

And like every other sector, the auto industry felt this lack of anything happening. People were still driving, but cars weren't just flying off the lots.

Back in 2009, pundits were predicting the end/demise/imminent death of the North American auto industry. By the end of 2010,nobody was suggesting that anymore - Ford, Chrysler and General Motors all proved they could be profitable, even during a year of economic purgatory - but there was still something missing, something that the auto sector lacked. It was saved by pent-up demand - one way or the other, people still needed to get around. When the old beater simply won't run, no matter how hard you kick it, you need to get your hands on a new car.

Or a used car.

And 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.

The lingering results of the recession included some changed attitudes:

People found that it was hip to be cheap - oops, sorry... I mean "frugal". Now you hear people bragging about what a great deal they got - how little you paid, not just about how much you paid. Bargain hunting became something that more people were willing to do.

Playing it safe became more important. Even with a so-called recovery, Unemployment remained high and jobs were not so secure. 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.

Playing it smart became safer., and playing it safe became smarter. 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 used vehicle will take us where we need to go, until the time when we can afford the risk of taking on a new car loan.

One of the oddities of the year 2010 that will go down in history is that there were times when some used cars were selling at almost the same price as their used 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.

Time for some predictions. Pent-up demand can only be fulfilled by used cars for so long. Cars still do wear down and reach the age of retirement. And sooner or later, they will have to be replaced. And even if they are replaced by newer used cars, those newer vehicles won't be available unless somebody trades them in for a new car.

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.

The writer is eastern Ontario's David Leonhardt. This article is about how used and new cars compared in 2010. Go to MonsterAuto.ca to buy your used car, wherever you live in Canada.