The last major recession that the U.S. experienced was in the 2010s—and we may be due for another. Some experts are forewarning that a recession is inevitable, and could hit the U.S. economy near the beginning of 2023. But with car sales already struggling, how will a recession in 2023 affect the car market?
Regardless of what a recession does to car sales and your finances
, nothing should come between you and getting the best deal possible on your car insurance
. Sign up to find out how much cash you could save today. Why are economists predicting an economic recession?
Though new car sales have picked up continually throughout the summer, Bloomberg
reports that, in April and May, they were down 11%. This is partially due to supply chain shortages and hangups, but also due to rising inflation, which has increased the cost of nearly everything, including cars. Bloomberg quotes Joseph Spak, an analyst at notable RBC Capital Markets, as stating “The market appears increasingly concerned about the economy, inflation, rising interest rates, and a recession.” It’s a bit of a tinderbox scenario: Client demand isn’t falling away rapidly, but the effects of inflation may continue to sharply curtail vehicle purchases.
What would an economic recession do to the car market?
It’s estimated that a recession would reduce monthly vehicle sales by about 4 million units, perhaps more. Reuters
also weighs in on the current situation, pointing out that less wealthy car owners would compose most of the market. In some ways, this is already the average, as Reuters reports that the average annual income of a new vehicle buyer is now $124,000—far beyond the average middle-class, single-person income.
An economic recession would cause the price of goods in almost every industry to skyrocket. However, due to the incredibly high cost of goods, most consumers would stop spending money, with most transactions being put toward basic necessities.
The car market, as a result, would collapse—vehicles, and the cost of owning one, could simply become too high for some consumers to entertain.
What can car drivers do to save money in the event of a recession?
One of the best options for car drivers to consider is to use “pay as you drive” insurance policies, while also taking the opportunity to carpool, cut back on road trips, and follow the necessary steps required in order to make their vehicle as fuel efficient as possible. Drivers should also think twice before simply selling their car during a recession.
While the extra cash is enticing, a new job, emergency, or economic recovery could make car ownership worthwhile. Plus if the next recession is fueled by a pandemic, private transportation is safer than riding public spaces. And if those personal trips are being taken with an EV, it’s even better for the environment.
MORE: Are Rising Gas Prices An Indication of a Recession Coming?
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