Individuals, businesses and companies have sought to reduce their costs and cut unnecessary – or perceived – expenses to zero. In the case of individuals, the real estate and car markets were the main areas of savings. This is clearly illustrated by falling real estate prices and falling car loans. Businesses and larger companies have also spared the fleet renewal and replacement – in today’s globalized world economy, there are no companies left unaffected by the crisis (“not ringing in” to paraphrase a classic lie), so cost cutting steps for companies also significantly affected the car market.
Sales of new cars are thus in a terrible state, with a decline of 60% in 2009, but another 67% is expected this year, driving the car market to unprecedented depths.
The used car market – and the credit market serving the used car market – did not perform much better last year. While companies, apart from smaller businesses, cannot afford to buy a used car because they have to meet prestige criteria, individuals do not, except in special cases. (Of course, nowadays, no one wants to shake a rag who doesn’t have the money, even considering whether a used car is worth a loan, let alone a new one …)
So the used car market is no less sluggish than the new car, as the availability of used car loans is not much better than that of new cars, and the prices are not so good that you might want to think about buying a used car after buying a new car. The market is waiting, not waiting for the buyer to lower prices – there is little chance that the used car market is not similar to the currently stagnant real estate market – but to get money again, and then it could begin to make up for the lag of the past one year (and maybe two by the time the crisis subsides) and buy a used car again. The used car market – and with it the used car loan market – is likely to explode when buyers return, asking if this will have a positive impact on the seller’s side?
When there is a sudden surge in demand for something, you can expect not only a rise in prices (for a used car loan, maybe interest rates soaring?), But also that sellers will do their best to take their goods.