Topic: A Bleak Outlook for Auto Sales in the US

[99 Silver]

Scary stuff:

http://www.autoextremist.com/

[tpl]

Indeed.   The law of unintended consequences applies here.

People don't buy new cars:    No credit or difficult credit. The new techno cars are more expensive. AND  the cars that can tow the boat or hold a large family are even more expensive 'cos of the new CAFE standards.

They keep the old car a couple of years longer:     The emissions gear gets older, in places where there are no emissions tests, there are more dirty smoggy cars.   As the cars get older people ( I suspect) are less inclined to maintain them, so more and more "minor" problems such as  worn wipers, light bulbs out, no snow tires.   More crashes, more dents. Older cars, more rusty patches.

The gap between the old clunker as a trade in and the new car is even greater, even less people qualify for the loans as they are bigger.     


And so on.

[safristi]

My English teacher woz Rite_ON..."BLEAK HOUSE" fortold Detroit 2009..i should listened to her..OR bought a 'SS Camaro 68 'vert ...tha Biatch

[mmret]

So they should buy smaller and smaller cars.

Money talks!

[toolatecrew]

It is sad but ture. Its like the perfect storm. Gas prices, material costs, forigen competiton, and now credit crunch.

Mind you even if a perfect storm comes along the people who prepare ahead have the best chance of surviving. The Big 3 are like the people who built their house next to a levvey in an area known to have Hurricanes. People have been telling them to move for years but they figured the worst would never come. Well they finally decided they better look at putting their house up for sale and the storm has already hit.

[Wolverine]

Indeed.   The law of unintended consequences applies here.

People don't buy new cars:    No credit or difficult credit. The new techno cars are more expensive. AND  the cars that can tow the boat or hold a large family are even more expensive 'cos of the new CAFE standards.

They keep the old car a couple of years longer:     The emissions gear gets older, in places where there are no emissions tests, there are more dirty smoggy cars.   As the cars get older people ( I suspect) are less inclined to maintain them, so more and more "minor" problems such as  worn wipers, light bulbs out, no snow tires.   More crashes, more dents. Older cars, more rusty patches.

The gap between the old clunker as a trade in and the new car is even greater, even less people qualify for the loans as they are bigger.     


And so on.

So, this is a "run to the hills" situation?? HEheheheheeh.

[Titanium48]

Indeed.   The law of unintended consequences applies here.

People don't buy new cars:    No credit or difficult credit. The new techno cars are more expensive. AND  the cars that can tow the boat or hold a large family are even more expensive 'cos of the new CAFE standards.

They keep the old car a couple of years longer:     The emissions gear gets older, in places where there are no emissions tests, there are more dirty smoggy cars.   As the cars get older people ( I suspect) are less inclined to maintain them, so more and more "minor" problems such as  worn wipers, light bulbs out, no snow tires.   More crashes, more dents. Older cars, more rusty patches.

The gap between the old clunker as a trade in and the new car is even greater, even less people qualify for the loans as they are bigger.     

And so on.

Aren't all of the consequences of an unintended event (like a major credit market malfunction) unintended by definition?

Need an affordable, fuel efficient family hauler?  How about the Mazda 5?  Unfortunately it is the only vehicle in it's class.  Whose fault is that though?

Towing?  North American vehicles are severely underrated in that department.  Compare the NA and Euro specs of any car sold on both sides of the Atlantic.  North American consumers are being upsold on larger, higher profit margin vehicles by overly conservative ratings.

Safety and emissions problems with older cars?   Any jurisdiction that doesn't have basic safety inspections and emissions tests has only themselves to blame if poorly maintained old cars are polluting the air and causing crashes by mechanical failure.  Emissions standards have been reasonably strict for over 10 years.  Don't forget about the energy required and pollution produced by the manufacture of new cars as well.

Rust and dents on someone else's car?  Who cares?   On your car?  Just think of all of those new car payments you're not making.

It's kind of sad when the majority of buyers need financing to buy something that will lose half or more of its value within 5 years.  I've been content to let the suckers take the losses for me and pay cash for used cars, so my concern is that lack of credit will push would-be new car buyers into the used market and drive up prices for me.

[tpl]

Ti48  You are correct as a consumer.  From the POV of a car company or car dealer all of my points do matter. 

 I may well be wrong but I think that a majority of jurisdictions in NA do not have annual emission tests. Even good old anal retentive Ontario only has them for a portion of the vehicles.

Is it a good thing that less new cars are built.... sure... as long as you are not the one out of work.
Do a few rusty patches matter... no... until the structural integrity is weakened.
I agree that the difference in towing specifications between Eu and here on a given car is perplexing.... probably caused by lawyers. 

I agree completely about the Mazda 5, we nearly bought one rather than the Fit.   Nowadays I read that the Mazda dealers can't get enough of them.

[conwelpic]

Indeed.   The law of unintended consequences applies here.

Need an affordable, fuel efficient family hauler?  How about the Mazda 5?  Unfortunately it is the only vehicle in it's class.  Whose fault is that though?

no it isn't, the KIA Rondo is a direct competitor to the Mazda 5.

[Titanium48]

Right - I'd forgotten about the Kia.  I was trying to point out the lack of competitors from US carmakers though.  They didn't cause the tight credit market, but they haven't positioned themselves very well to weather the storm either. 

The Mazda 5 and Kia Rondo are a simple idea really - take a subcompact hatchback, make it a bit wider and stretch it just enough to make room for a 3rd row of seats.  You've just fit minivan-like interior space into a vehicle the size and weight of a station wagon.  Surely Detroit could have thought of that too.

[conwelpic]

Right - I'd forgotten about the Kia.  I was trying to point out the lack of competitors from US carmakers though.  They didn't cause the tight credit market, but they haven't positioned themselves very well to weather the storm either. 

The Mazda 5 and Kia Rondo are a simple idea really - take a subcompact hatchback, make it a bit wider and stretch it just enough to make room for a 3rd row of seats.  You've just fit minivan-like interior space into a vehicle the size and weight of a station wagon.  Surely Detroit could have thought of that too.

your right about the carmakers, but the odd thing is they do have competitive products but they are not available in North America and in this segment of the market this includes Honda and Toyota too.  For example when I was looking around before I bought my Rondo, the Focus wagon was on my consideration list, then in 2008 they dropped it (nothing to replace it, yet they have models in Europe that would), so that put me out of the Ford showroom, I considered the Matrix but it was a bit too small for my requirements and I didn't want a mini-van (too big), so again nothing in their lineup in the size without going to a SUV, which I didn't want.
The closest competitor in GM would be the HHR (my daughter has one), but too claustrophobic and not as well thought out.  Chrysler, we look at the Patriot, but we were not impressed, mediocore quality and the overall package not impressive.   

So it all boiled down to the Mazda 5 and the Kia Rondo, for my requirements the Rondo won us over and with over 17,000 km and nearly a years ownership we don't regret our decision - joy to drive, good mileage and very efficient use of space.

In the US the Rondo outsells the Mazda 5, but not so in Canada, except they did in August for the first time.

[johngenx]

Captive financing companies HAVE contributed to the credit crisis.  Anyone heard about 84 and 96 month car loans that are financing the upside down portion of a previous car loan, hence someone is financing WELL OVER 100% of the purchase price of their car/truck?

So here we are, with people 125% financed on their homes (or more!) and 125% financed on their cars.  Yup, that's gonna work out just fine...

Oh, and don't forget the payment on the TV they couldn't afford (but HAD to have) and so on and so on.  Cripes, who needs a friggin TV so bad they finance it at 20% or more?  Morons.

Add together a massive mortgage payment, a massive car payment, and rising credit card payments, and you've got an equation that adds up to "FINANCIAL DISASTER!!"

[safristi]

  Glad ta see ya read my 129% over_extended post ...fer people & Gov......   a few daze ago...................glazed ice....no just a plain vanilla....................fack UP by the greedy BOOMERS...................

[My Old Buick]

T48 is right, The used car market in general will be huge $10,999 cars will be huge. Loan sharks and repo companies will be making a fortune, a consumer will have to put down. "In house" financing at 10 points or more will become normal. The zero percent loan and leases, and the "zero" downpayment also helped contribute to their downfalls. This hurts everyone in all sectors, every business is looking to cut expenses as the forecast looks grim..hang on to your hats.

[articsteve]

2000 US new car dealers are expected to close by this time next year.

[initial_D]

2000 US new car dealers are expected to close by this time next year.

Any one of them a Toyota dealer?

[tpl]

Saw this today

"GMAC said yesterday it's restricting auto lending to buyers with credit scores of at least 700, who represent about 58 percent of U.S. consumers. The move added to the global credit squeeze that threatens to choke economic growth as companies and consumers find it harder and more expensive to borrow. Plummeting auto sales and record foreclosures have resulted in $5.4 billion in losses at GMAC over the past year and led credit agencies to reduce the debt to junk.
                       <snip>
GMAC provided 43 percent of GM's second-quarter auto loans. GMAC yesterday raised the rate it charges auto dealers for making loans that aren't part of special incentive programs by 0.75 percentage point. Most loans will be limited to 60 months. "


Whole article    at   http://www.bloomberg.com/apps/news?pid=20601103&sid=a5MYzWoc31sg&refer=us

One hopes that this means that these dumb 84/96 month auto loans will go away but the first part is a bit more worrying I would think.   How many people in the US will NOT have a credit score >= 700 when the mortgage thing finally works its way through and will that cause a further drop in new car sales.

[toolatecrew]

Saw this today

"GMAC said yesterday it's restricting auto lending to buyers with credit scores of at least 700, who represent about 58 percent of U.S. consumers. The move added to the global credit squeeze that threatens to choke economic growth as companies and consumers find it harder and more expensive to borrow. Plummeting auto sales and record foreclosures have resulted in $5.4 billion in losses at GMAC over the past year and led credit agencies to reduce the debt to junk.
                       <snip>
GMAC provided 43 percent of GM's second-quarter auto loans. GMAC yesterday raised the rate it charges auto dealers for making loans that aren't part of special incentive programs by 0.75 percentage point. Most loans will be limited to 60 months. "


Whole article    at   http://www.bloomberg.com/apps/news?pid=20601103&sid=a5MYzWoc31sg&refer=us

One hopes that this means that these dumb 84/96 month auto loans will go away but the first part is a bit more worrying I would think.   How many people in the US will NOT have a credit score >= 700 when the mortgage thing finally works its way through and will that cause a further drop in new car sales.

I'm not saying there wasn't too much credit out there before but how terrible is this for failing GM.

They were losing their shirts on leasing that was giving people the payment buyer the ability to buy cars at a lower payment. So they cut it off. But in order tokeep these payment buyers they extended low finance rates and long amortization to keep the payments down. Now that is gone too.

The majority of the US market and I woukld gess of GM buyers (save Caddy and maybe Vettes) are payment buyers. If they don't have lower payments possible than competion than Toyota Mazda etc they are screwed. It doesn't matter how good the Malibu or new Cruze is if people can't make the monthly payments needed to get the vehicles out there and prove how good they are.

[johngenx]

Well, if GMAC won't lend to anyone under 700 CS, then there would seem to be a business opportunity!  Perhaps some banks, or other folks, might offer loans to the "less than prime" customers?  Of course, they'd have to pay higher interest rates, but sounds like a great investment, no?

Of course, with the economy in the US tanking faster than Amy Winehouse, the only people with CS's over 700 soon will be Gates and Buffet, and not by much...

[JSCC]

Well, if GMAC won't lend to anyone under 700 CS, then there would seem to be a business opportunity!  Perhaps some banks, or other folks, might offer loans to the "less than prime" customers?  Of course, they'd have to pay higher interest rates, but sounds like a great investment, no?

Of course, with the economy in the US tanking faster than Amy Winehouse, the only people with CS's over 700 soon will be Gates and Buffet, and not by much...

So being a loan shark is your next business idea? See you at Rama!