How The Economic Downturn has Affected The Auto Salvage Industry

There is absolutely no doubt that the economic downturn has significantly affected the automotive industry in a negative way, Ford, General Motors and Chrysler were the three hardest hit resulting in two of these companies receiving bailouts from the government. Decline in auto sales can be blamed on many factors but the two most culpable are the massive increase in oil prices and the sudden credit crunch that affected nearly every American. Because these companies deal in new vehicles that are significantly more expensive than old or salvage vehicles they lost much of their market to these industries.

Salvage vs. hybrids

Even though new car sales declined significantly during the heights of the downturn in 2008-2009, there still existed the need of the consumer to purchase vehicles. Consumers opted for the smart buys and choose hybrid vehicles instead of those pesky and expensive gas guzzlers. Hybrid vehicles, though cheaper than traditional, new vehicles were still expensive to those hardest hit and thus they turned to salvage vehicles. While there are no exact figures it is estimated that the salvage industry during this time boomed as it left one of the only alternatives to purchasing expensive new autos.

The gift of cash for clunkers?

In an effort to boost new car sales as well as significantly reduce the operation of gas guzzlers on our roads, the government implemented the cash for clunkers program. This significantly helped the auto salvage industry in the short term because it was greatly involved in the pricing and collection and sales of these vehicles. The fact that most of these vehicles were sold to be shredded or crushed meant that this industry was given an expiration date of sorts; and while in the short term a lot of money was made, this program was essentially bad for business in the long term.

Having had to compete with hybrid cars that use less fuel and cash for clunkers the auto salvage industry has still managed to not just stay afloat in the economic downturn but it has also managed to become fairly successful during these times. It is true that hybrid cars and clunkers provide big competition but it is also true that salvage vehicles have always been directed to a niche market and that market never disappoints. The auto salvage industry is not expected to go out of commission any time soon.