Armchair Executive: What Would You Do If The New Car Market Imploded?

This is the weekly series where you, the Autosavant commentariat, are invited to take the reins of the auto industry, for at least as long as it takes you to write a comment. It’s all the responsibility, with none of the compensation!

I grew up in a household which, by and large, respected the value of the new car. We bought whatever had a warranty, and when the warranty ran out, it was time to start shopping again.

“You aren’t buying someone else’s problems,” we were told. “You don’t have to worry about reliability,” others said. Never mind the fact that a couple of our new cars were real lemons; one car decided to spew acrid clouds of white smoke out of the steering column as we pulled into the driveway one morning. It was an electrical short caused by faulty wiring, covered under warranty, of course.

My wife’s family, on the other hand, feels the opposite way: buy used cars and run them into the dirt. “It’s irresponsible to bury yourself in debt for something that won’t even keep half its value in five years,” they said. “Why do you need something no one else has ever owned, just to get yourself from point A to point B?” they asked.

Generally, it’s considered sound financial advice (with a little argument here and there) to buy used, or even Certified Pre-Owned, if you don’t mind spending a little more.

What if, one morning, America woke up, rolled out of bed, and collectively chose to be used car people? (Obviously compensating for time zones, it would have a rolling effect.)

The decision may not be theirs to make. Subprime auto loans are starting to make a comeback, in a way that somewhat echoes the subprime mortgage crisis and subsequent credit crunch of the late 2000s.

We also have a more recent macroeconomic example unfolding as we speak in Russia.

So if the “nightmare scenario” presented would happen, we can probably assume that in the months ahead, there would need to be a fire sale on the glut of new cars which would suddenly and inexplicably take over holding lots and vehicle processing centers at ports across the country.

Meanwhile, it’s not hard to imagine an oversaturated market for off-lease vehicles and “newer used” vehicles would suddenly see inflated prices and rapidly decreased day-supply, as buyers with the cash to burn suddenly swallow up the best used stock. New, and “newer used,” would suddenly compete with each other, dollar for dollar.

Would the government, at the Federal or State level, decide to leverage tax dollars to try and lift the flagging market? How long would the effect last?

The biggest question I would pose to you as an executive would be: how do you start from scratch? What would your full line of “New Cars For A New Era” look like in a market that’s trying desperately to compete with a massive–but also dwindling, and decaying–pool of fresh used cars? How do you compete against your own best work?

Have your say below in the Comments.

Author: David Surace

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1 Comment

  1. I’d race to be the first to develop self-driving cars … instant edge over the used market!

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