Pub. 13 2014-2015 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 1 , 2 0 1 5 20 new jersey auto retailer PEAKED Flash back to 2008. The financial crisis was front and center, the banking system was on the brink of systemic failure, and confidence in the core underpinnings of the U.S. economy were coming into question. As a result, in 2009, economic growth crumbled. GDP growth fell to -8.2% and unemployment skyrocketed. By 2010, the New Jersey unemployment rate hit 10.3%, and total employment in the state had declined by nearly 170,000 from 2007. Consumers were hit by the perfect storm of sluggish economic growth, increasing layoffs, stagnant wages, increasing debt, and plummeting housing values. In addition, the prospect of deleverag- ing that many households faced, due to heavy mortgage debt, put a big storm cloud over consumer spending. With all of this going on, a new vehicle purchase was totally out of the question for a significant number of New Jersey consumers, and the new vehicle market tumbled hard and fast. According to data compiled by IHS Automotive, new retail light vehicle registrations in New Jersey totaled about 358,000 units in 2009. The market fell by 16% from 2008, and was off 27% from 2007. And the 2009 total would have been even worse, were it not for the Cash for Clunkers program that gave a boost to sales in the summer of 2009. Many analysts predicted that due to the bleak economic outlook, new vehicle sales would remain in a prolonged slump for an extended period, and that reaching levels attained in the early 2000s was out of the question for a very long time. And now, here we are in early 2015. Proving the doomsayers wrong, the New Jersey new vehicle market is right back where it was in 2007. New retail car and light truck registrations in the State approached 500,000 units in 2014, and the total is likely to reach at least 510,000 in 2015. In 2009, in contradiction to the naysayers, Auto Outlook was bullish on the prospects for a steady recovery in the new vehicle market. We predicted a rebound in sales, and didn’t see any reason why the market would not return to the levels of the early 2000s. There were four main factors that contributed to our relatively bullish outlook at the time. 1 Pent up demand. The economic downturn led to a period of well below average sales as consumers postponed purchases due to weak household finances, and worries about the future. As a result, the average age of cars on the road reached a record high. New vehicle sales are inherently cyclical, and for good reason. When sales fall to the abyss (like they did from 2008 thru 2010), replacement demand is practically guaranteed to push the market higher, and that’s exactly what happened. 2 Strong affordability. The unprecedented response by the Federal Reserve to cut interest rates to near zero, and its stated commitment to stay the course for the long term, have greatly reduced borrowing costs. Low inflation and a competitive new vehicle market have also kept a lid on new vehicle prices. As a result, new vehicle affordability has remained at very strong levels for several years. 3 Greatly improved products . The improvement in new cars and light trucks during the past ten years has been dramatic. Today’s new vehicles offer greatly improved fuel economy, The New Jersey Auto Retail Market Hasn’t Just Yet