Pulling Demand Forward?

Automakers are worried that lower financing costs on new cars might cause a drop in used car prices in the coming years. As more new cars are sold there will be more used cars in the future, and as we all know, when there is greater supply than demand, prices fall.

And this bad why?

Okay, perhaps it is for car producers. With stiffer competition from used car lots new car lots might suffer. But then, why should those who want used cars be expected to pay, indeed arguably to underwrite, new car dealers and manufacturers simply because they want greater sales?

Analyst Adam Jones frets that ... "we are taking consumers out of the normal trade cycle, pulling forward demand from the future." We're not really sure what that means in part because we're not sure that there is such a thing as a normal trade cycle. But if it sounds like buzzspeak it likely is buzzspeak. In this case, it sounds like car makers, or those most interested in new car manufacture perhaps, wanting to protect what they view as 'their' turf. They can't have too many used cars available because that will, naturally enough, affect new car sales. That would be bad.

But for whom? All those associated with new cars of course. Yet that says nothing about those who cannot afford or merely do not want new cars. Those latter groups simply should not be expected to buy new just because it helps the automotive industry or even, by specious argument, society as a whole. We don't live in Terry Gilliam's Brazil; we live in the real world where we have options, one of which is that we are not obliged to buy new anything merely because it helps those associated with the production and sale of that anything.

There's nothing wrong with buying a new car if that's what you want. But there's nothing with buying used cars either. So how about if we just the markets decide such issues? Why not force the new car industry to deal with the pressure of used car sales? We might actually get better, cheaper new cars anyway. It sounds to us like the best of both worlds.