24 Mar, 2012

Economic Downturn Impact: U.S. Car Purchases Hit, U.K. Shifting from Buying to Hiring

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Ramsey, NJ (PRWEB) March 23, 2012 – The U.S. auto industry is likely to become a casualty of high gasoline prices. Persisting high gasoline prices could drive down demand and add to the financial troubles of the already vulnerable auto industry. Further, a sharp slump in auto sales has immense potential to affect the economy and employment significantly.

The TechnoMetrica Auto Demand Index nosedived by 49 points, or 48%, in March posting its all time low 49 vs. 94 in February and 105 in January. March’s reading of the Auto Demand Outlook Index is 22 points below its 12-month average of 71.

Note: Index readings correlate with demand and purchase plans for new automobiles. Higher index scores indicate higher demand, while lower scores indicate lower demand. The baseline score for the Index is 100, pegged on the average demand during February to April of 2007.

TechnoMetrica Market Intelligence computes the Auto Demand Index based on responses to the question in its nationwide survey of Americans: How likely is it that you will buy or lease a new vehicle within the next 6 months? Would you say very likely, somewhat likely, not very likely or not at all likely?

The share of likely buyers dropped from 16% in February to 8% in March. The number one factor in the dramatic slowing of new car consideration is the rapidly increasing price of gasoline, which has a big impact on people’s budgets and behaviors.

“High gas prices function exactly like a regressive tax. Today, over 50% of Americans expect gasoline prices will exceed $4.50 per gallon over the next three months and nearly a third expect it to exceed $5.00,” says Raghavan Mayur, president of TechnoMetrica Market Intelligence.

“Gasoline prices are the single biggest wildcard facing auto manufacturers. Our prior research has shown that the U.S. auto market could shrink 10% if gas prices hit $5 a gallon and 18% at $6 a gallon. This gives a significant new meaning to the idea of gas pains,” says Mayur.

Prior to this month’s big decline, car purchase intentions had been increasing nicely for more than 6 months with February intentions almost equaling those we saw in 2007. Suddenly, this month, Americans have lost the confidence they need to purchase or lease a new vehicle.

The dampening of consumers’ appetites for new vehicles followed the broader drop in consumer confidence registered this month by the IBD/TIPP Economic Optimism Index, which fell to 47.5 from 49.4 in February (down 1.9 points or 3.8%).

Not all of the findings in TechnoMetrica’s March Auto Demand Index were negative. The survey includes a section on the brands consumers would be interested in considering. Here, Ford is the clear winner with nearly one in five new car intenders considering a Ford. Second, is Chevrolet, Toyota comes in third, Honda is fourth and rounding out the top five is GMC. Intention to buy American brands is consistently 10 percentage points ahead of the Asian brands.

According to Mayur, auto manufacturers and their dealers must proactively prepare for a slowdown. Auto factories take a long time to alter production rates and no manufacturer wants to have too many cars in inventory. The same holds true for car dealers, who must finance the unsold cars in their inventory.

Car manufacturers have done their part by significantly increasing the fuel economy of cars and light trucks. They have achieved this by reducing weight, improving aerodynamics, and increasing combustion efficiency. They have offered alternate fuel vehicles and an increasing number of electric vehicles. Yet the car buying public has shown a clear preference to drive gasoline-powered cars.

Each month TechnoMetrica uses Random Digit Dial telephone methodology to conduct live interviews with more than 900 respondents. The margin of error for the survey is +/- 3.3 percentage points.

Record Number of UK “Hire” Companies Formed in February

London, UK (PRWEB UK) 23 March 2012 – As the United Kingdom continues to adapt and respond to the most serious recession in living memory, an emerging trend among new companies shows that more and more of us are looking to hire instead of buy.

A record 125 “hire” companies were created in February, smashing the previous record of 107 set in March 2007. The most popular types of hire company include cars, skips and plant equipment, whilst the most common company type is a Limited company.

Managing Director of UK Company Formation agent Duport, Peter Valaitis comments: “There is just less cash available to businesses right now because of low sales, tighter margins and less bank lending. That doesn’t change the fact that companies and people still need to get their hands on certain equipment to carry on. It makes sense that more of us are turning to the concept of hiring rather than buying the things we need to operate.”

Since the financial crisis, a new marketplace for online rental services has developed online. Companies like hirehub, irent2u and erento have captialised on a new attitude towards hiring as a YouGov poll suggests around 75% of people would head straight to the internet if they needed to hire something.

Hiring the same thing frequently can work out more expensive than buying an item up front, but there are many circumstances when hiring can be the right option. When hiring something, the hirer is generally not responsible for repairs and upkeep. They do not need to worry about that item being replaced by a newer version, and it is not necessary to part with a large amount of cash up front.

The biggest reason for hiring something of course is when the item is only need for a short period of time. It would make no sense for a couple to buy a marquee for their wedding, and it would be a waste of money to buy a car to use for just a few days whilst abroad.

Duport Associates Ltd is a leading UK company formation agent, operating in the UK for around 15 years. Duport registers around 10,000 new companies each year using its Companies House approved software. The Company Register which is maintained by Companies House contains public information about Limited companies and directors.