The Used Car Industry

In the past 30 years, the United States auto industry has gone through many
changes. In order to stay competitive with a foreign market, constantly
threatening to eat away at profits, the American auto industry has had to
respond by being flexible and adapt itself to this new situation. Although, in
the past, they were slow to get the message sent out by the consumers, the
domestic auto industry now seems to be more than willing to analyze, and answer,
the demands of a smarter, savior consumer. The growth of the used car field has
been a result of these demands.

Rising, higher prices for new cars have caused the typical American consumer to
examine alternate solutions for their transpiration needs. As the average car
on the road is 8 years old, compared to 5.8 years in 1970, the signal to the
auto industry has been that cars are being built better and consumers are not
afraid to buy them.

Of course, this choice does not come without an opportunity cost for the
consumer. A used car will generally be bought on the condition "as is" or, at
best, with a very limited warranty. If a buyer of a used car drives off the lot
and finds they have purchased a vehicle that needs lots of money spent on it for
repairs, they may possibly find themselves out of luck. Another downside may
come as more people continue to saturate the market, looking for used cars to
buy, the resources available will become scarce. An increase in used car prices
may gradually start to rise. As the figures indicate, for now consumers seem to
be content with taking this risk. Sales for used cars and trucks last year
totaled at 15.1 million(going on your article\'s figures).

The auto industry has been busy changing and evolving to answer consumer demands.
One of these signs has been the growth of large auction houses that are
appearing all over the country. Big investors are attracted by the potential
profits, which are an average of 1.5% of the wholesale price. The auctioneers
make their money by auctioning off used cars and trucks mainly to dealers only,
and are supplied with vehicles that come from trade-ins, repossessions, leased
vehicles, and smaller used car lots. With this reallocation of resources many
of the smaller mom and pop used car lots have been bought out, or forced out of
business.

Competition is heating up with the rise in the number of auction houses. This
has forced the auctions to be more selective in the kinds of vehicles they offer.
More care is being spent to check title searches, odometer readings, and
accident history of the vehicles that is an advantage for both the dealers and
consumers. More money is being spent in advertising and offering perks to lure
in prospective dealers. As some auto manufacturers are entering into the
auction business independents are beginning to have cause to worry that their
profits will begin to fall.

The auto dealers are not sitting by being idle either. They are responding to
consumer demands by building and expanding existing used car lots to sit side by
side next to their new car showcases. The dealers are more than happy to do
this as they can make more of a profit selling a late-model used car than on a
new car. Without having to offer much of a warranty will also only add to this
profit. Dealers still have an opportunity cost of their own to contend with.
Just like a consumer, they have the risk when buying the cars from and auction,
and take the chance of being stuck with a lemon. Also, for every dollar spent
on their used cars, they have less money to spend on the new car section.

The cycle of change in the auto industry is an ever evolving one. New car
manufacturers will need to take a long, hard look at the industry and may be
forced to make some changes to attract business back their way. They may be
forced to lower prices, cut back production on new vehicles, or lay off workers
if people continue to look for cheaper vehicles to purchase. Economists will be
sure to keep an eye on the industry to see in which way the market will be
moving next.

In the past 30 years, the United States auto industry has gone through many
changes. In order to stay competitive with a foreign market, constantly
threatening to eat away at profits, the American auto industry has had to
respond by being flexible and adapt