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 21 new jersey auto retailer W W W . N J C A R . O R G safety, electronics, infotainment, and performance. The owner of the average ten-year-old car has had a strong motivation to purchase new, and this should continue for quite some time. 4 Economic recovery. In 2009, many economists believed that the U.S. would suffer years of well below average growth as households cut way back on spending in an effort to reduce debt. No doubt, consumer spending has shifted into a lower gear from the accelerated levels in the 1990s and early-to- mid 2000s. But at the time, we believed that the combination of flexible labor markets and efficient flow of capital (two primary characteristics of the U.S. economy) would lead to faster, if not spectacular growth rates. And indeed, quarterly GDP growth has been positive for 19 of the past 21 quarters. So for some very good reasons, new vehicle sales have returned to healthy levels. The obvious question now is: has the market peaked? Or, is there still an opportunity for sales to go higher? In short, we believe that the auto market recovery still has mo- mentum, and can improve for at least the next couple of years. Most of the factors mentioned above that contributed to the recovery during the past five years are still in place. The average age of vehicles in operation is still near record highs, and the pace of product improvement has continued, unabated. The list of features likely to be included in the significant majority of new vehicles within the next few years (such as rear view cameras and autonomous driving technologies) are likely to persuade even more “fence-sitters” to take the plunge, and enter the new vehicle market. In addition, interest rates are likely to remain low and an improving labor market should boost wages, both helping to keep vehicle affordability strong. Clearly, there is a limit to how high sales will go. Eventually, replacement demand will wane. And although household bal- ance sheets have improved, many still need to build up savings, which will place some restrictions on funds that are available for spending. However, the market has only recently returned to baseline trend levels. When the market plummeted in 2009, sales sank well below trend levels and remained there for several years. There’s no reason why sales can’t remain above trend levels for an extended period. Auto Outlook predicts that new retail light vehicle registrations in New Jersey will increase again in 2015, with further increases likely for at least the next two years. The sales peak is likely to be reached by 2017 or 2018, but by then, the market should be approaching near record-high levels. Jeff Foltz is President of Auto Outlook, Inc., an independent automotive market research firm. He can be reached at autooutlook@me.com.