Will strong car sales continue?
If this question doesn’t keep you up at night, you’re not a true auto finance professional. In a way this is the only question that matters.
The dilemma is this: Yesterday, George Storch, the former Toys “R” Us Inc. chief executive, told CNBC that despite what we might have heard, the economy is in poor shape.
“There’s no doubt the economy is soft,” Storch told CNBC. “I’ve been saying this consistently. The other thing was a silly, silly waste of time: the weather discussion during the first quarter. Go back, the weather is a ridiculous argument that hid the fact that it was weak in the first quarter, too. It’s been weak the whole time. It never got strong. It was weak over Christmas. Weak in the first quarter. Employment picture, taxes, concern over healthcare. It’s not a robust time.”
We are not sure we have heard a stronger, more-succinct condemnation of the economy in recent weeks.
Yet, car sales during the period Storch references have been strong, as evidenced by the car sales numbers this week. Chrysler celebrated sales growth for the 51st straight month. General Motors posted a rise in sales last quarter, despite heavy recalls. How does Storch’s opinion on the overall economy reconcile with the auto industry’s performance?
Two points to consider: 1) The Department of Transportation recently reported that vehicle miles driven rose 1.8% in April as compared with the year-prior period; and 2) IHS Automotive reported in June that cars on the road are on average 11.4 years old, a record. Older cars, driving more miles, could — or maybe should — equal more vehicle sales in the near future.
Will car sales increase despite the economy? Or, will the economy overwhelm these systemic trends related to car usage and age?
Two more questions to keep you up at night.
