Car shoppers looking to get a new set of wheels are doing more than upgrading their ride. They are improving the economy.
American auto makers have been posting record sales for their first quarter, and according to a report from Ward’s Automotive Group, auto purchases are exceeding a 14 million annual rate for every month so far this year. These numbers are translating into American auto makers reopening production plants, keeping their plants open during times of the year when they would be typically closed and keeping more Americans employed.
Car sales are often a good indication of how healthy the overall economy is. A decrease in car sales is an early indicator of trouble ahead since it shows that people don’t feel comfortable spending the money on a car. Let’s use an example of a consumer, John Smith. John Smith has an older car that has the occasional problem, but he doesn’t necessarily want to spend the money on a new car. Why wouldn’t he want a new car? Maybe he works a commission-based job and sales are slow, or his workplace is going through cutbacks.
Let’s say that John’s car breaks down, and it isn’t an easy fix. He has to get a new car, and in the meantime, he takes the bus to work. The bus runs late a couple of times, and John gets fired for tardiness. Now, John feels even less comfortable spending money on a car, but at the same time, he is still relying on public transportation to get to job interviews. John will be limited to jobs located close to public transportation and might miss out on higher paying opportunities because the daily commute is too difficult.
By not having access to a reliable car, John’s financial problems snowballed very quickly. On the other hand, studies have show that having access to a reliable car can lead to less dependence on public assistance and upward mobility in the work force. When all of these data and studies are added up, the conclusion is that Americans have yet another incentive to spring for a new car: They are improving the economy!
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