Automakers are thrilled that new car sales will top 17 million vehicles this year. They haven't seen sales like this since 2001. But little do they know that their sales should be much, much higher. And they would be, if we all got a raise.

No doubt you're aware that the average household income in the United States has flat lined for two decades. The average American has not increased his or her real buying power since 1995. Yet car prices continue to climb above the rate of inflation. And so the percentage of the American population buying a new car is shrinking.

To get a historical perspective on this, I dug up sales data from Ward's Auto for the each of the last seven decades. Then I turned to the US Census Bureau for the population data on all those decades. After that it was simple arithmetic to calculate what percent of the population bought new cars during those years.

Every year, the population of the United States increases by more than 2 million people. So even though a smaller percentage of people are buying a new car, the growing population props up sales.

The best sales years were in 1978 and 1986, when 6.9 percent and 6.8 percent of the population bought a new vehicle, respectively. The worst years were in 1961 and 2009, when only 3.7 percent and 3.4 percent bought new cars. In fact, 2009 was so bad that you have to go back to the Great Depression to find a year that was worse. In 1933 only 1.7 percent of the population bought a new car.

What the data shows is a recent downward trend in the percentage of people buying new cars. What masks this downward trend is a growing population. Every year, the population of the United States increases by more than 2 million people. So even though a smaller percentage of people are buying a new car, the growing population props up sales.

This year, if sales in the American market hit 17 million new vehicles that would represent only 5.2 percent of the population. But if 6.9 percent off the population bought a new car like they did in 1978, sales would hit 22 million vehicles. Or, to put it another way, nearly 5 million American households have been priced out of the new car market.

And that's mainly because wages have stagnated. The average new car transaction price is now $33,500, while the average household income is $53,000. Today, it's mostly households with incomes above $75,000 that are buying new cars.

Yes, car buyers can purchase entry-level cars for a lot less money, and many do. But more and more Americans are buying used cars, and this is especially true for used premium and luxury cars.

No doubt car sharing companies like Zipcar and mobility providers like Uber are having an impact. Some households are finding that they don't need to own a car (or a second car), even if they can afford it. And this trend is only going to grow.

Nonetheless, the real culprit right now is stagnant wages. What the auto industry really needs is for the average American household to get a raise, and then more of them for years to come. We have 20 years of stagnation to make up for.


John McElroyJohn McElroy is host of the TV program Autoline This Week and an automotive industry expert. He also hosts the web series Autoline Daily and Autoline After Hours.





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