Car sales rise strongly in March

By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released new motor vehicle sales data for the month of March:

On a seasonally adjusted basis, new motor vehicle sales rose by 4.0% in March to be 4.0% higher over the year.

Most of the increase in sales over the month was driven by special utility vehicles (+7.5% MoM; +18.4% YoY), although passenger motor vehicles (+3.3% MoM; +1.6% YoY) also rose solidly. The sale of Other vehicles (+1.4% MoM; -6.5% YoY) underperformed relatively speaking.

Turning to the time series which, due to volatility in the data have been prepared on a 3-month moving average basis (3MMA), you can see that total motor vehicle sales have well and truly recovered from their GFC lows, but still remain below their pre-GFC high:

Australia’s changing preference for special utility vehicles (SUVs) is also highly visible on the above chart. Sales of SUVs have been gradually trending upwards just as sales of passenger motor vehicles have been trending down.

The increase in motor vehicle sales in March was broad-based, with every state experiencing an increase in motor vehicle sales over the month. A chart showing motor vehicle sales by mainland state is shown below on a 3MMA basis:

I am not sure how much weight the Reserve Bank of Australia (RBA) places on this release. However, considered in isolation, you would have to think that the strong rise in motor vehicle sales in March would lessen to likelihood of an interest rate cut at next month’s RBA board meeting.

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Comments

  1. UE i dont reckon the RBA cares too much about car sales. cars are a neccesity, they wear out and need to be replaced. as the population grows we use more cars. is a strong number though. wonder if tied into the increase in lease finance from yesterday.

    • 95% of cars on road are financed. this makes them a luxury very few can afford–not a necessity (especially considering the bogan penchant for 2 HSV’s). cars are included in the CPi and are the second largest purchase most households make. the RBA without doubt cares about car sales and therefore credit. also read a while back the bounce is to be expected as no one can afford overpriced houses. maybe it was an MB article?

      • cars arent a luxury EW they are a neccesity for households and business. does make some some sense though that people who have decided to wait on buying houses may look to upgrade the car instead.

        • im not with you on this which i why i pointed out that nearly all cars are financed. this says to me they are a consumer discretionary/ego driven purchase encouraged by distortive tax policy etc. they are not a necessity as can be seen by average trip driven/vehicle kms data etc. admittedly we have shitty public transport system but cars are not a necessity and most people could get by on a 3 year old vehicle updating say every 10 years. and they rarely need two vehicles.

          • ok EW we will have to agree to disagree. but try live out in the suburbs, where the majority of australians live, without a car and see how you go.

          • i live in the rural surrounds about 35 mins from hobart by the beach. people down here think i am nuts as no one likes to drive more than ten minutes (which is about half the aussie average trip from memory). thats my point. its a lifestyle choice funded with disposable income as opposed to finance like most aussies. a car has never been and never will be a necessity its all about perspective. like first home owners in mcmansions with euro kitchens etc and new iphones every 12 months. not having a go i just saying. i work with high income earners and many just dont own cars down here. i lived all over world and found this to be case amongst many different classes etc. its a lifestyle choice and therefore discretionary. its not the trip to woolies/coles for the weekly shafting by two outstanding retailers (depending on your views). i understand your point just dont think its backed up by facts especially as people move back toward to the city centre.

        • dumb_non_economist

          I’ll enter the debate on this one!
          A reliable mid range priced car is a necessity especially for a family, an expensive SUV/BMW/Merc etc is a luxury.

          • haha. what you mean i dont get an AMG for my first auto with iphone dock and celebrity branding etc. i understand what you are both saying but necessity all depends on perspective/lifestyle.

          • dumb_non_economist

            EW,
            You can, but it’d be a waste of your dough! I also see what you’re getting at, but I agree with GB. A car (one that is) is a necessity for most families as from my experience public transport is crap especially if it doesn’t include going to a central area. Try going from burb to burb in Perth and on a w/end!
            Try getting to work for a 6.00am start that isn’t in the city, shit for that matter any time of day.

      • drsmithyMEMBER

        95% of cars on road are financed. this makes them a luxury very few can afford–not a necessity (especially considering the bogan penchant for 2 HSV’s).

        You are conflating two different scenarios:
        a) owning a car
        b) owning a nice, new car

        The latter is a luxury, the former is only a luxury in the same way owning a computer or phone (fixed or mobile) is – yes, you can get by without but your life is so much easier with.

        I’ve happily lived overseas without a car (in Zurich), so I’m not married to the idea out of any sort of tradition or default behaviour. However, I wouldn’t want to be car-less (/motorbike-less) anywhere in Australia.

        • i dont think i am and you have merely summarised my point. i reiterate. 95% of cars on road are financed. therefore most aussies cannot afford the car they drive. they are therefore making a discretionary purchase, not food, not water, not shelter, sex, sleep etc. these are the necessities of life. its certainly the case amongst my friends and peers, i am the odd one out owning second hand vehicle. i might be getting a bit wanky but nowhere in maslows heirarchy of needs does it say we need a hydrocarbon powered horse. again you are clinging to a certain point of view which says in the current exponential capitalist paradigm its an absolute life imperative to own a new vehicle. i know what you guys are getting at. i just dont agree and more importantly what is the substition effect going on here. why are aussies buying more cars/taking on more credit again albeit at lower levels. i am just thinking out aloud but this doesnt say delevering to me? etc.

          • drsmithyMEMBER

            95% of cars on road are financed. therefore most aussies cannot afford the car they drive.
            My point is that while the significant tax advantages of leasing over buying exist, this is not a given.

            It is like arguing that since 95% (heck, probably more) of business base their operations around some sort of credit line, then most businesses are not profitable.

            i might be getting a bit wanky but nowhere in maslows heirarchy of needs does it say we need a hydrocarbon powered horse.
            It doesn’t explicitly say we need a house, either, but nearly everyone I know would not consider living somewhere more salubrious than a tent to be “luxury”.

            again you are clinging to a certain point of view which says in the current exponential capitalist paradigm its an absolute life imperative to own a new vehicle.
            No, I’m really not. I’m saying that not owning a car, for most people, would be a significant negative impact to their quality of life, with repercussions on everything from family life to employment.

            You are the person conflating “owning a car (or motorbike)” with “leasing a new car” in terms of meeting needs, when these two things are not implicitly interchangeable.

          • ah yes the significant tax advantages of purchasing a new car when you are in the 38% tax bracket (bulk of taxpayers) and you drive new car off lot and lose 20-30% off the bat. it is nothing like comparing to business that add value/create employment/revenue etc v a depreciating asset manufactured in faraway place. maslow mentions property and comfort/resources doesnt it? in first comment i made the point that most aussies should be buying 3 year old cars and turning them over every 10 years or so, not every 3 for another new car, which they clearly cannot afford. substitute–sensibly. not conflating anything.

          • ps. i take your core points smithy but they are not very strongly argued particularly if your key point is that dimwitted aussies think they are better off taxwise if they buy a new car. this is just crazy. buy good quality second hand car, keep for five- ten years, drive crap out of it, invest difference you would save compared to the $23990 in term deposit/high interest cash account/woolworths dividends and own a 3 year old car every 5 years and average aussie would be lots better off. pretty simple stuff really but the bogan wants to drive brand new HSVs with jetskis attached etc.

          • $23990 or so being the number required to effectively salary package etc. it makes no sense.

          • drsmithyMEMBER

            ah yes the significant tax advantages of purchasing a new car when you are in the 38% tax bracket (bulk of taxpayers) and you drive new car off lot and lose 20-30% off the bat

            You are still conflating different situations. Your entire argument is a non-sequitur.

            You do not need to buy a new car to take advantage of leasing. Thus, you do not need to wear the huge hit of new car depreciation.

            There are tax benefits apart from the purchase price – fuel and maintenance costs come out of pre-tax salary and the proceeds of selling the vehicle at the end of the lease are GST-free.

            in first comment i made the point that most aussies should be buying 3 year old cars and turning them over every 10 years or so, not every 3 for another new car, which they clearly cannot afford. substitute–sensibly. not conflating anything.
            No, you did not. You said that since 95% (where does this figure come from anyway ?) of cars are financed, people can’t afford them (this itself is a non-sequitur – do you argue people who take out mortgages can’t afford a house ?). You then went on to state, based on that, that _cars_ are a luxury, non-essential item. Not just new cars. Not just leased or otherwise financed cars. All cars.

            ps. i take your core points smithy but they are not very strongly argued particularly if your key point is that dimwitted aussies think they are better off taxwise if they buy a new car. this is just crazy. buy good quality second hand car, keep for five- ten years, drive crap out of it, invest difference you would save compared to the $23990 in term deposit/high interest cash account/woolworths dividends and own a 3 year old car every 5 years and average aussie would be lots better off. pretty simple stuff really but the bogan wants to drive brand new HSVs with jetskis attached etc.
            Now you have completely shifted the goal posts to a fundamentally different argument, entirely based on your own personal risk/reward/value judgements. Some people derive a great deal of personal value from driving around in a new car, just like some others do from travel. Some people are happy to drive around in a 20-year old car and never leave their home town. Still others are happy to spend thousands of dollars on music and high-end sound systems to play it. Etc.

  2. This data do not point to an economy in particular trouble… compare to what happened in 2009. SUV are expensive cars to run.

    • with car sales still at levels from 5 or 6 years ago it doesn show an economy in great health either. especially if you looked on a per capita basis.

      • Hey GB, today I was reading a blog and I noticed the following paragraph , it is talking about next inflation reading:

        <>

        Now, forget for a moment all the forecasts for the upcoming inflation numbers… how is it possible that 2.3% would be the lowest annual result since the December quarter 2000, when the target band is supposed to be 2 to 3% y/y ???? And how is it possible that with 2.3% y/y every one is already screaming and getting hysterical about a rate cut? The answer is obvious when so many people are having to repay a mountain of debt and are cheering for continuous high inflation. However inflation does not equal prosperity, not at all.

        • Ops, here is the text from the blog: “If the underlying inflation rate comes in at 0.5% and of course there are no revisions to the recent data, the annual rise will drop to 2.3% – the lowest annual result since the December quarter 2000. “

          • i agree inflation has been too high in the past SSEC but now its going to go too low. my view is that inflation will fall below the RBA’s target band later this year.

        • i wouldnt say screaming and getting hysterical SSEC but the inflation reading is probably the most lagging economic indicator there is. people in business are living in the debt deleveraging /debt deflationary (falling inflation)environment now and they naturally look at the past 12 months and how things have gotton worse and project that out into the next 12 months where things get even worse for them then they are now. thats why they are getting hysterical (not that id use that term) becuase they can see it now but the inflation reading wont pick it up for another 6-12 months. these are not normal times where economic models work very well.

          http://www.smartcompany.com.au/economy/049231-confidence-among-smes-falls-to-two-year-low-as-revenue-growth-stalls-myob-survey.html

          • You know my view, after a decade of inflation running too high, it’s only healthy to have a period of disinflation, e.g. inflation running around 2% instead of around 3%… however there is too much debt in Australia for that to happen.

    • i own a subaru (i reckon for under 50-60k they are best car on road) but yep they chew the juice and the tyres, my only complaint really. everyone wants to pretend they have an adventurous outdoor life with an SUV. the reality is they drive the kids to soccer, never take the thing off road, sit on the couch all day stuffing their heads with fatty/sugary “needs” and 50% of them are overweight or obese. again this reinforces my belief that new cars are just a crutch for a pretty sick society really.

      • A Subaru, especially one that costs anything like $50-60K, seems like an odd choice for an “energywonk”. You admit yourself they chew the juice and tyres, which was my experience with Subaru as well.

        If you’re looking at new cars, for $25K you can get a perfectly good Corolla-sized car with a turbo-diesel engine that will do better than 5L/100km. For $35K you can get a Camry-sized car or wagon that’s almost as economical. If you’re looking at second hand cars, you can pick up 5yo VW Golf TDI for around $15K.

        FWIW, I’m completely baffled as to why Aussies have fallen in love with SUVs. They’re expensive to buy, expensive to insure, expensive to maintain and expensive to fill up. If you have a large family, why not buy a people mover?

        Somehow I doubt SUVs would be anywhere near as popular without the FBT distortions (mentioned above) and the various fuel rebates. If fuel cost what it does in Europe or Japan, I reckon it would kill the SUV fad pretty quickly. I mean, you can’t argue that petrol is too expensive in Australia if we’re all madly buying gas-guzzling SUVs!

        • agree 100% with all of this. own subaru cause i do live in rural area and very keen surfer. i drive on gravel every single day. i dont own a prado or a range rover so i do rationalise it that way. ford econetic is most fuel efficient car in oz. better than prius and no lifecycle considerations like those

          • I drive a 98 Prado, because thats what suits us as a family. It was cheap to buy ($12,000), has 8 seats (we have 3 kids, and friends in tow most of the time), and yes, it gets a good workout on weekends and holidays.

            People like me depend on other people buying these vehicles, taking the depreciation hit, and not taking them off road. That means there is a plentiful stock of older, cheap vehicles that haven’t been beaten up and that don’t cost much to buy or maintain. For $12k, plus, say $8k of equipment I have an 8 seater vehicle fully equiped for extended 4WD trips that’ll last me 10 years or so.

            I don’t quite know the point I am trying to make here – just that I like all those soccer mums buying their SUV’s and just ferrying the kids around…..lol

        • and yep dont get me started on the ridiculousness of tax policy which has trapped most aussies into thinking that buying new cars helps them out taxwise. see points above.

        • and not sure i would ever own a 60k car i really only see them as means to end. second hand foresters do not cost 60k even sti versions. hahah

        • The smaller SUVs in recent years have been improving gas mileage, you can now get the smaller(turbo diesel) SUVs that consume in the 5.9L-7L/100k range, which is no different to a midsize car.

          As for those suggesting get a people mover. Take a look at yourselves.

          Finally, this discussion when it comes to finance reminds me of Jim Rogers quote, to paraphrase Finance is the only area where the people driving Maserati, Ferrari, BMWs etc are advised by people who get to work by public bus.
          (Oh and buy a tractor).

    • Though 20 years ago in Japan, before a big bubble went pop, car sales, particularly luxury car sales went into orbit.

      It may not be an indicator at this moment, can’t argue contrary to you, I just don’t see this as an indicator.

      Some people that have 7 credit cards bounce at a Woolies check out also have nice new Audis. I know I speak in the plural, I have only seen this once though.

  3. Lots of employees have novated lease vehicles. Lots of people in small business have a vehicle using a chattel mortgage (and get a refund of the GST next BAS). Other businesses have operating leases.

    All of the above have some tax benefit of some sort.

    Then there are the others who have personal loans (the worst way to purchase a vehicle from a tax point of view).

    I am still in two minds as to whether or not this would affect the interest rates. Lots of people just recycle into a new car every 4 years or so (and if all goes well, keep the payments the same, and cut down on the maintenance and get a nice brand new car).

    • Says a lot to me. You don’t go out and lease a $50K car if you’re anticipating financial armageddon or your head on the employment chopping block. On a unit cost basis, leasing is very expensive, however not everyone has cash available (irony). I see this as more a sign of people’s propensity and capacity to keep spending, which is why we are ultimately a grossly expensive place to live.

      Case in point, 3 hot dogs, 2 buckets of chips and 2 drinks at the footy the other day…….$47. They wouldn’t be priced as such if the market couldn’t sustain it. Not to mention reserve areas 90% full at $130 per family.

      Again, rate cuts won’t make a shred of difference as households already have the capacity to meet their obligations, they simply choose to put lifestyle options first and squeal at any bias towards future austerity (rate rises).

      • jimbo

        I wonder if how many of the $130 seats would be filled if we had to fork out cash instead of the credit card.Our ability to afford luxury coincides with the rapid increase in private debt.

        Similarly with Rock concerts etc etc

      • Totally agree. This is a voluntary “rate rise” that people who go to the football and rock concerts etc etc pay.

        $47 for that crap food. Amazingly stupid if anyone buys it. Take a cut lunch (loaf of bread and some fillings), then take the family to a pizza restaurant on the way home. Same money, much better value (arguably, similar crap food)…at least the kids will not be hungry as quickly.

        • Agreed on the food. I know plenty who see it as part of the ‘experience’, as the family we were with did. Such a captive market and people are lazy.

    • bv2726,

      >> Then there are the others who have personal loans (the worst way to purchase a vehicle from a tax point of view).

      What other options does an individual have?

      1. use own savings (which means a “chunk” suddenly goes missing in the bank, which, in my case feels like a “shotgun wound”! 🙂 )
      2. “equity mate” (consolidate into the home-mortgage, i dont have a mortgage!)
      3. use auto-finance (which means I cannot buy from private-sellers!)

      Looking at the total cost of “novated lease”, it somehow feels like I will be paying a “lot” more.

      I am thinking of getting a car(used) to upgrade from my 14yr old hyundai!