We're Beginning To See What The New Normal Will Look Like

For the cottage industry of organizations that make it their business to predict how many cars will be sold in the U.S. this year, it's been a chaotic year, from early projections of just under 17 million to new projections of 12 million or lower. The more interesting question, though, isn't how many but simply how.

Many in the industry—everyone from dealers to automakers to crew of people paid to make educated guesses—thought it would go something like this: A massive, 50 to 60 percent drop off in sales for however long things were locked down, followed by a huge buying spree because of pent-up demand, with sales not equalling pre-coronavirus projections but not apocalyptic either.

Now, those that are paid to follow these things expect less of a spree and more of a sustained period of lower-than-normal but higher-than-full-lockdown car sales. That's in part because of increased online sales and new federal guidelines that declared vehicle sales essential services.

From Automotive News:

Retail sales fell about 48 percent last week from J.D. Power's pre-crisis forecasts, after dropping 51 percent the week that ended April 12 and 55 percent the week prior. That marks three straight weeks of improvement from the 59 percent decline registered the last full week of March.

With all major markets showing signs of recovery, J.D. Power said Wednesday it is forecasting April U.S. retail sales of 500,000 to 613,000, or a decline of 43 percent to 54 percent from its pre-virus forecast, representing an overall volume decline of 472,000 to 585,000 from April 2019.

Also somewhat interestingly there is this tidbit:

The best-performing major segment has been large pickups, while compact cars have been hardest-hit, J.D. Power said.

Which possibly is a function of gas being so damn cheap these days but also could be a function of financing being so cheap right now as well, compared to before the pandemic, with nearly a dozen automakers including the Big Three offering more than a few zero-percent finance deals. That has had a predictable, depressing effect:

Due to the incentive offers, Americans are taking out larger loans, according to J.D. Power, with the average loan amount increasing by $2,900 in the first two weeks of April compared with March.

And so the new-car economy for now is some amount of people taking out massive loans to finance their expensive and big new trucks, in an economy that will likely still be on the fritz for some time. I fail to see how this can go wrong.