Who’s Buying All These New Cars?

Massey Cadillac

The auto industry has really been on a roll, selling in March an annualized 14.4 million units—which looks to top last year’s sales by 2 million units.

That is a lot of cars, and many are crowing about the industry’s comeback and the end of the recession and proffering other feel-good myths.

Rising gas prices are pushing sales of smaller, fuel-efficient cars, as you might expect. All the major brands are reporting increases, except for Honda (down 8.4 percent). In percentage increase, Chrysler beat ’em all, with a March gain of 34 percent over last year. Big cars and trucks are selling, too.

But there are a few downsides. First, the prices of new cars have gone way up (see chart after the break) and are looking to go higher. Second, credit is easing, and some crazy people are even taking out 72-month loans. Third, easier financing has seen a big jump in numbers of people with poor to fair credit buying cars.

Car prices chartJ.D. Power provides some interesting figures for the first two months of 2012: New-car buyers in the “C” tier of credit ratings (625-649) grew by 19 percent over last year’s period; buyers in the “D” tier (0-624) grew by 23 percent.

Buyers in the upper A+, A and B tiers grew by 7, 11 and 15 percent, respectively.

I want to know who these credit-hungry buyers are. My guess is that they’re younger people who earn less and are willing to stretch out payments over 6 years. There is also the deferred-purchase factor, with older buyers needing new transport after years of nursing the old banger along.

But profiles of car buyers are hard to come by. We do know that most people pay off their auto loans before their credit cards or mortgages. Simply put, they need their cars to get to work.

Let’s hope the happy days continue, as credit eases and more buyers opt for sensible (though expensive) cars.

Has a credit-rating problem kept you from buying a car recently? Did you finally get financing?

—jgoods

Find Used Cars in Your Area at CarGurus

1 Comment

  1. I think the answer is easier than you think. With used car prices at record highs and credit reasily available now, the cost to drive a new car is almost the same as driving a used car. Also, remember that car loans are “secured” forms of credit, so lenders are more willing to loan than with unsecured debts like credit cards.

    My wife and I are in the top tier of credit so we had a lot of options when we recently bought a new Toyota.

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