“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
Buzz: Want a hint of what California shoppers are thinking about spending big bucks? Unless year-end sales at car lots provide some magic, the state will see fewer vehicles purchased for two years in a row.
Source: California New Car Dealers Association
My trusty spreadsheet tells me total car buying statewide — new and used vehicle registrations — was 4.34 million in 2019’s first three quarters, a 1.2% decrease over 12 months. (By the way, the association excludes fleet purchases from its new-car counts.)
In 2018, Californians bought 5.72 million cars, trucks and sport utility vehicles. That was down 1.2% in the year after rising at a 0.2% yearly pace in both 2017 and 2016.
And this year’s buying saw the traditional car fall further out of favor: 2.28 million sold through September, down 4.1% vs. 2018. Compare that with 2.06 million light trucks and SUVs sold, up 2.1% vs. 2018.
So the car’s share of all California vehicle purchases fell to 52.5% vs. 54.1% a year ago.
Let’s start with new vehicles, the market’s pricier option — and what keeps things like auto factories humming.
Californians bought 1.43 million new vehicles in 2019’s first three quarters, a 5.1% decrease over 12 months. Last year new vehicle transactions dipped 2.4% after dropping 1.9% in 2017 but rising 2% in 2016.
This trend suggests some level of consumer skittishness.
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And it’s not just the traditional sedan’s unpopularity. Yes, car sales are down 10.8% this year. But even new trucks/SUVs sold are off 0.3% vs. 2018.
When the wallet’s a bit light and transportation’s needed, the used-car lots get the action: 2.91 million previously owned vehicles sold in 2019’s first three quarters, but that’s up only 0.8% over 12 months.
That’s a tad better than last year when California’s used vehicles sold fell 0.5% after rising 1.4% in 2017 and dropping 0.8% in 2016.
Traditional car sales fell at the used car lot, too, down 1.4% in a year. Meanwhile, sales of previously owned trucks/SUVs rose 3.8% vs. 2018.
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … THREE BUBBLES!
What’s confusing is the mixed message. And that alone is not totally encouraging at the time of year when shopper psychology feels extra important.
Pricier trucks — costlier to buy and operate — are growing in popularity. Even in a year where gas prices are up. For example, trucks were 57% of new vehicle sales this year vs. 55% a year ago.
But buying those trucks is more often happening at the used car lot, where trucks were 43% of sales this year vs. 41% a year ago.
That translates to a modestly cooling appetite for Californians looking to buy a car with the used-car dealer gaining clout. Note that previously owned vehicles grabbed 67% of 2019’s year-to-date sales vs. 64% in 2016.
The willingness of Californians to pay up for trucks and SUVs suggests they’re still feeling somewhat economically flush. But making these trendy purchases at the used car lot tells us consumers statewide also have some budgetary constraints.Related Articles
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