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3:07 pm
Fri July 11, 2014

No, car sales are not going to just keep growing and growing forever

This has been a very good year for car sales.
Credit GM

Here's the main case to be made for annual car sales in the U.S. exceeding 18 million some day: 

Unlike other mature car markets (Europe), the U.S. population is still growing.  So....the more people there are, the more cars they will buy.  

The argument acknowledges that many young people are postponing buying cars, but says that's just because it's hard to get a job right now.  As soon as the economy improves, they'll buy cars, just like their parents.

But a new study by AlixPartners says that's ignoring a lot of trends that will push car ownership rates down.

The group's John Hoffecker says, first, there's interest rates.  They're going up, and will keep going up as the federal government weans the economy from measures that have been keeping them artificially low.

"Each time you raise it three percentage points, as an example, you're gonna lose about $2500 in purchasing power," he says.

Then, there's all those long-term trends.  Hoffecker says the practice of replacing one's car every two to three years has been dropping for decades - and as car quality has improved, people have been driving  their cars longer.

And we're seeing more people moving to cities where they have access to public transportation - and car-sharing options like Zipcar.

Hoffecker says all these trends means it's likely car sales will peak next year, at about 16.9 million, and then decline again - never to reach the halcyon heights some foresee.
 

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