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November may be an early Christmas present for automakers. Sales have shown strong signs of recovery since the recession began two years ago, rising 14 percent in November. Chrysler and Volkswagen were the clear winners with up to 45 percent of sales. However, Hyundai and Ford managed to score double digit gains in sales with 22 and 13 percent respectively. While sales are still not as high as they were prior to the recession, they are showing strong signs of recovery despite many households struggling financially.

Consumer Demand is Key

Retailers have worried about consumer demand since the recession started. If consumers have little money for necessities, how will they react when faced with high ticket items like new car purchases? It seems that they have little to worry about as consumers show their willingness to get a new car despite their money worries. The increase in sales had little to with huge discounts or year-end sales of which there are fewer. In fact, the average price of a vehicle rose 4 percent, with prices reaching over $30,000.

Used Cars worth More

Part of the dynamic has to do with older cars being on the road and those cars being worth more than in prior years. The average age of a car on the road is almost 11 years, a full two years more than the average age in 2007. The price of maintenance and fixes goes up as a car ages and many of these cars are reaching the point of diminishing returns. However, the lack of supply from car-makers during the Japanese tsunami and the sale of clunkers in the “cash for clunkers” program have left a shortage of used cars available to buy. This drives up prices on all used cars and makes trade-ins worth more, too. All these factors are driving a pent-up demand that is now being released into the marketplace.