Lentz: Auto Market to Flatten Late in 2014

Detroit Free Press

Based on the pent-up demand for new cars fol­low­ing the reces­sion, Toy­ota North Amer­i­ca CEO Jim Lentz sees the vol­ume of new car sales falling off.

Find out more about what Jim Lentz fore­casts for the near future in auto sales.

The boom in sales of new cars in the U.S. has been fueled by con­sumers replac­ing vehi­cles they kept through the reces­sion.

But a top auto indus­try exec­u­tive says that the pent-up demand like­ly will be sat­is­fied by late next year.

Jim Lentz, Toyota’s North Amer­i­can CEO, said that demand for new cars from own­ers of old­er mod­els could dry up some­time late in 2014. If the econ­o­my isn’t cre­at­ing jobs at a faster pace when that hap­pens, the boom could screech to a halt.

“The mar­ket then has to work off a much bet­ter econ­o­my, an improv­ing econ­o­my,” Lentz said. “If we don’t have that, I think the mar­ket may flat­ten out.”

New car and truck sales hit a three-decade low of 10.4 mil­lion in 2009 as the finan­cial cri­sis dried up mon­ey for car loans and U.S.-based auto com­pa­nies near­ly went out of busi­ness. Con­sumers, many who feared they could lose their jobs, refused to buy new cars and instead kept their old ones on the road.

Sales, though, grad­u­al­ly rebound­ed and now are run­ning at an annu­al rate of around 15.6 mil­lion, just below pre-reces­sion lev­els.

Lentz, speak­ing in New York said the aver­age car and truck in the U.S. is now more than 11 years old. At the same time, the sup­ply of cov­et­ed used cars that are one-to-five years old is down to lev­els not seen since the 1980s. Used car prices have jumped, mak­ing their month­ly pay­ments as high as those for new cars, Lentz said. That’s brought more buy­ers into new-car show­rooms, he said.

But as peo­ple replace their cars at a faster rate, the used-car sup­ply increas­es. Even­tu­al­ly, prices will drop and lure buy­ers out of the new-car mar­ket, he said.

“So in time, as that one- to five-year base builds its way back up, I think we’re going to reach that equi­lib­ri­um, prob­a­bly some­time near the end of 2014,” he said.

Read more as JessTrueCar.com’s Jesse Toprak dis­agrees.

 

 

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