The factors associated with the changes in the demand for new motor vehicles in Australia are economically instigated

The factors associated with the changes in the demand for new motor vehicles in Australia are economically instigated. There is a probability that the factors discussed below influenced the time series between 2007 and 2016. Likewise, the factors are more likely to influence the motor vehicle industry in the future as well.
a. Change in Real income versus the motor vehicle prices
Motor vehicles are characteristic with high elasticity of demand. When the real income is increased at a higher rate compared to the inflation, the demand for new cars increases because many people can afford their prices. In 2009 many people could not afford new motor vehicles following the global economic recession experienced in 2008. The inflation rate and taxes imposed on the normal goods were high. However, as the many countries started to recover from the financial crisis, inflation and tax rates dropped hence motor vehicles became more affordable. In 2012, real income for employees was increased leading to an increased amount of disposable income.
b. The availability and cost of motor vehicle loans
Although some people can buy new motor vehicles using cash, many people rely on financial credit. In Australia, it is difficult to new financial loans so as to finance new cars. Likewise, the interest rates charged are high especially on unsecured loans. When collateral imposed to access car loans are high, then many people will shy away from purchasing new motor vehicles. The same case applies when the interest rates are high. This can be associated with low purchases of new motors vehicles in 2009 and increased purchases after that when the rates were reduced, and the amount of collateral required dropped.
c. The cost of maintenance
The cost of maintaining a motor vehicle is high especially during double-digit inflation. The cost of petrol, as well as insurance premium, is increasing rapidly. However, it should be noted that cost of petrol and insurance premium does not have a high impact the demand for new motor vehicles. The new model of motor vehicles consumes little amount of fuel as compared to the old models.

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