Does Anyone Want To Buy A New Car? Not While The Old One Still Runs

Car manufacturers will announce their domestic sales for October today. Analysts expect them to be good, although that is relative. The annual run rate of US vehicle sales will probably be below 12 million. That contrasts with the 16 million five years ago.

Detroit and import car firms still have a problem, and even an economic recovery, which is likely to be modest, will not make it go away. People own their cars longer than they used to.

Research firm Truecar expects most auto firms to show drops in unit sales from September, but the figures are likely to be up sharply from October of last year. GM should remain the market share leader at 18.3%, but that is down 21% from last year. The No. 1 US car company needs to get its IPO finished before these numbers get much worse.

Ford (NYSE: F) and Toyota (NYSE: TM) are expected to be just behind GM with market shares of 16.7% and 15.% respectively. Ford’s figure is based on its resurgence driven largely by popular new models. Toyota’s piece of the market is down from 18.2% last year for obvious reasons.

The primary problem that the car companies have is that people keep their new cars longer than they used to. Firms like JD Power which track long-term vehicle reliability say that cars and light trucks remain popular with owners even after long periods and a great deal of mileage on the road. Last year, the average trade-in age for cars was 6.2 years, up from 5.8 years in 2007. The may not seem like much except when it is spread across the 12 million vehicles that auto companies expect to sell this year. Reliability, once a marketing tool for manufacturers, has become their worst enemy.

Some analysts attribute slow car sales to high unemployment. Others say it is harder for consumers to get credit from stingy banks. Each of these things may be true, but cars that don’t break down often make these other points academic.

Douglas A. McIntyre