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  • Another “Recession-proof” Myth Busted

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19 Jun 2008

Another “Recession-proof” Myth Busted

  • By Bill Conerly
  • In Uncategorized
  • 2 comments

Myth: "The used car market is recession-proof, because when times are hard, people buy used cars."

CarMax, the large used car chain which reported a steep drop in earnings last quarter, now says that the price of used SUVs and trucks is falling sharply.  Although it was not in the news story, the drop in SUV and truck prices is probably not fully compensated by rising values of fuel-efficient cars.  So the value of the CarMax inventory is dropping.

Let's talk about that myth.  I'll grant that someone affected by recession who absolutely needs a car is more likely to buy used than new.  However, most folks already have a car.  When they have lost their jobs, or are very worried about losing their jobs, they don't buy used instead of new; they buy nothing at all!

My research into the most cyclical industries showed used car sales as extremely vulnerable to recessions, despite the common myth.

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Bill Conerly

    Comments

  1. Rachel Morgan
    June 19, 2008

    That makes a lotta sense. Whatever the employment stats are these days are – I see a lot of high paying jobs on employment sites –
    http://www.realmatch.com
    http://www.monster.com
    http://www.simplyhired.com
    its as if the stats dont match the market

  2. Saj
    June 25, 2008

    Hey Bill,
    You allude to research on the most cyclical industries. I’d like to read more about that. Can you direct me to where I can readwhat you refer to?
    Thanks!

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