Question

The auto industry is cyclical in the sense that auto sales rise during economic expansions and fall during economic recessions. What would you expect to happen to the markets for used vehicles and for vehicles repairs during economic expansions and recessions?

Answer 1

No, It will not be same for Used vehicles.

Auto market is cyclical in nature, that reflects that it acts according to change in market. When there is economic expansion, the market grows as people have high tendency to spend, and during recession people do not have high tendency to spend, therefore, during recession people pay for repairs or even if it is not possible to repair vehicles, they tend to buy a used vehicle.

Because used vehicle will cost less as compare to a new vehicle.

Therefore, generally it will have complete opposite relation with market scenarios.