Cars… Tool vs Toy

After reading over my last post, I got to thinking. Would I buy a new car if they made something inexpensive and got good gas mileage? Honestly, I don’t think so.

When our country was fat and the economy was cooking only a mere 2 years ago, people consumed! We bought everything and anything we fancied as it was all so easy. With that mindset, we bought new cars whenever we wanted. If they offered a new color, we could trade in our 1 year old car and buy a new one. “Tack on the difference in the loan!”. Auto makers knew this and they churned our cars like mad. The industry grew. Hindsight being 20/20… they grew too much.

In the distant past people bought a new car when the car they had could no longer be cost effectively repaired. It was a BIG deal for a family to go out and buy a new car. Even then, most people bought what suited the family needs and budget. I believe those days are upon us again. More and more people are looking at their car as transportation and not the play toy. People, including myself are looking at our budgets with much more scrutiny these days. We are cutting back on all we spend our money on. The car, which we know is a depreciating asset is now becoming the tool it was originally intended to be. We are buying less new clothes, less dining out, less money on vacations etc. It only seems logical that we would spend less on our transportation. We are repairing the old car and keeping it on the road longer. Not giving much thought to that new whiz bang hot rod car that just came out. We now spend our money on paying off old debt, saving in preparation for a possible job loss, paying for higher medical bills, higher grocery bills, higher gas prices, utilities etc. We simply do not have the “spare” money in our budgets to replace a car that works just to buy a “new” one. Some people will still need to buy a new car but I believe they will do it when it’s completely necessary and not just for the hell of owning a new ride.

I see the only way the auto industry is going to survive is to downsize substantially. They need to match the demand. We can’t have more people making cars than we do buying them.  It is simple supply and demand.