How the Economy and Politics Affect Car Sales

It was recently reported in Used Car News that there has been a significant drop in sales to Hispanic buyers in the US.

While part of that drop could be the pre-shocks of the REAL ID Act of 2005 sending tremors through the undocumented or illegal population, the rest can be attributed to the slumping housing market and the aftershocks among the legal skilled labor and construction workers.

Initially started as an effort to curb illegal immigration within the parameters of a larger national security act the REAL ID Act enforces that driver's licenses be issued by Federal standards that would require a Social Security number in order to be issued a license. Several states have already adopted the policy and car dealers in those states have seen a very noticeable drop in sales to Hispanics.

From Used Car News:

Prior to 2007, North Carolina allowed residents with Mexican driver's licenses to obtain state driver's licenses. Now the state enforces a rule requiring a valid Social Security number for obtaining a driver's license.

Jody Midgette, owner of Midgette Auto Sales in Harbinger, N.C., saw a huge effect on the dealership's sales to Hispanics.

"Prior to the change, we used to do 15 percent to 20 percent of our business with Hispanics," he said. "In 2007, we did less than 5 percent."

Additionally, states that were having a burst in new home and commercial construction such as Arizona are beginning to feel the effects of the construction slump that has been long coming but fast-fueled by the sub-prime mortgage fiasco.

Again, from Used Car News:

Many Hispanic immigrants - both legal and illegal - work in the construction industry, he [Mauricio Espinosa, president and CEO of automotive consultancy G20 Inc.] said.

The downturn in homebuilding means less work, which limits vehicle purchases, especially pick-up trucks.

Mike Cunningham, owner of Payless Cars & Trucks in Tucson, Ariz., said a downturn in construction has chipped away at those values.

"Prices on truck merchandise are not what they were a year ago," he said.

Cunningham said news in Arizona has centered on the drop in construction, which provided a lot of growth in the state in recent years.

All of this is a microcosm reflection of what is hitting the rest of the economy. In this case the car market is being affected greatly which in turn will affect other areas of the economy and vice versa.

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