The automobile industry has ever been so enthralling and alluring. It attracts consumer everyday as its habitués are in constant need of upgrading their gadgets and maintaining their motorcars with the latest tech and systems. These industries manufacture products that are not only cognizant to many people but are necessitous to them as well. Moreover, a tint of allurement with the latest and fascinating designs never hurt nobody. My family and I have been a devotee of latest cars and automobile in general. Although the price of cars is quite high in U.S. considering the insurance, loans and its taxes’ payment but since me and my family had a deep love for cars we were able to buy and maintain our cars according to the latest trends. But this situation was before the pandemic.
By the end of the year 2019, a novel Corona virus (Covid-19 ) has spread across the whole world (Shereen et al.). This has convulsed the consumer beliefs, created a havoc in the stock exchange market and has led to the unemployment rate in U.S. spiking to its highest, that is 14.7%, hence making more than 30 million people unemployed (Furman et al.). In such Sturm und Drang situation, we cannot even think of buying a new car let alone upgrading it. As a result of social distancing and lockdown imposed in the country, we are restricted in our homes. Similarly the automobile shops are also closed under the lockdown so even if we think of buying or repairing our car we cannot do it as our health is on stake.
In the month of May the price of the used cars spiked to its unprecedented rates, rising to 17% as compared to its expectations before the pandemic started. This was mainly because new cars were not being made as the automobile showrooms and manufacturing firms were closed due to pandemic. This redirected consumer’s buying paradigm to the used-car lot. As the consumer demand increased, thus leading to the increased price rate of the used-cars. Moreover, as oil prices have decreased to an astonishing level since the disruption of the supply demand in the country, this has led to the consumers shift towards the use of heavy trucks and sport vehicles.
Although new cars, on the other hand, have seen an increased price rate by 3%, from March 2019 to March 2020, but there has been a drop rate by 0.1% in April 2020 (Average New-Vehicle Prices Up Nearly 3% Year-Over-Year in March 2020 – Dealer Ops – Auto Dealer Today). The decrease in consumer demand for the new vehicles has lead the dealers to offer automobiles with an interest rate of as low as 0% and increasing the loan lengths from six to seven years. Hence, in the short run the price of the automobiles is inelastic in nature as people being cautious of their financial status do not prefer buying new cars no matter how much low the oil, interest rates and taxes have gone. While in the long run, if the prices remain as low as they are now (which would hardly be the case) the automobiles would become a price elastic commodity.
Albeit the prices, loan lengths and interest rates for new cars have dropped for the time being, me and my family won’t be buying them anytime soon. The main reasons being the security of the fiscal status, the skepticisms towards hygiene when going out in automobile showrooms and the situation of the country under lockdown. Although dealers have started the virtual sales of automobiles (Davis and Engelhorn) but the self-satisfaction of test drive and cross checking every nook and corner of the car ourselves would restrict us from using this facility anytime soon.