Automakers Face Balancing Act Between Consumer Wants and Needs

[Apr 6, 2009.]

 

Ah, the impulsiveness of new romance; being seduced by that new car smell, the luxe leather interior, or a sound system that blasts tunes all the way to Mozambique, but wait: unemployment, shaky investments, shrinking savings and increasing bills quickly interrupts any flirtation with buying a new car.  Until recently, US automakers have rewarded brand loyalty with bigger cars, lavish upgrades, and more options. For those who remember the vroom-vroom of V8's and glass pack mufflers, that was often enough. Once a Chevy person, always a Chevy person. But like romantic fantasies, buying one's dream car often gives way to reality; price, fuel economy, and safety win out over the seduction of a big ride with even bigger attitude.

The US continues to depend on foreign petroleum fuels, and gas cost more than $4.00 a gallon not so long ago. Now American consumers are facing a credit crunch; those who can actually afford to buy, register, insure, and feed a new car may not be able to find an auto loan at favorable rates. America's romance with big powerful cars goes back generations, but the reality of tight budgets and economic worries are telling American consumers to snap out of it. US auto sales figures confirm that economic worries are winning out over romantic appeal; spending beyond one's means is no longer sexy.

 Automakers are finding ways to entice consumers back to dealerships. A promising trend provides limited protection to buyers for a specified period if they lose  their jobs after buying a new car. These programs promise that consumers will be able to keep their cars and not suffer damage to their credit for a period of months after losing their jobs. This may encourage some consumers to buy new cars, but automakers, dealers, and lenders need to find ways of ensuring that the romance between car enthusiasts and new cars advances from passive fascination to buying a new car and paying for it. Acknowledging the changing needs of today's consumer may render the V8 and leather upholstery a thing of the past for many  models, but replacing them with features compelling to budget conscious buyers is the challenge. US automakers must balance the right amount of romance with enduring practicality and accessible auto loans.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.