Vehicles And Smaller Used Car Lots example essay topic

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 articles 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 ar 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. Big investors are attracted by the potential profits, which are an average of 1.5% of the wholesale price.