After years of not being able to get them, Americans want their wheels — no matter the cost
After years of not being able to get them, Americans want their wheels. New light vehicle sales, including cars, SUVs and pickups, were up about 20% in June from this time a year ago, according to data from the research company Wards Intelligence.
Some individual carmakers, like Honda and Volvo, saw increases that were double that. That’s despite prices for new cars, like prices for everything, basically continuing to rise.
A lot of people like to buy a new car on the regular. Say, every few years, said Michael Brown, an auto dealer with locations in and around New York City.
“You own the car in the first three years of its life, very unlikely you’re going to have major repairs or anything like that,” Brown said.
But with supply chain shortages, people haven’t been able to maintain that schedule. And now they’re itching for a new model … even though prices remain elevated.
“The pent-up demand has been so high for so long. And consumers are just thinking, this is just how it is nowadays,” said Jessica Caldwell with the car shopping and research site Edmunds.
Lots of consumers also feel confident they’ll have the money to buy vehicles they might have once considered unaffordable. That’s thanks to the strong labor market, said T. Rowe Price chief economist Blerina Uruci.
“You have this idea in mind that when you need a job or when you need to work more hours in the week, you’ll be able to do that because those jobs are available,” said Uruci.
There’s also demand from rental car agencies and even parks departments who want new pickups and weren’t able to get a look in the past few years.
One thing giving some buyers pause, though: the cost of auto loans.
“Rates were so low for so long, people get used to that. So then when they see that interest rates come up and we actually have to pay interest on things, it’s almost like getting punched in the nose,” Brown said.
And depending on what the Federal Reserve decides about interest rates later this month, those metaphorical punches might hurt even more.