Two weeks ago to the day, Frank Williams provided a heads-up on the impact of the coming credit crunch on new car sales. Automotive News [AN, sub] now reports that some small regional banks have stopped making loans through auto dealerships. Even the big boy's auto loan departments– Chase Auto Finance, AmeriCredit Corp., Wells Fargo Auto Finance, Mechanics Bank and Sovereign Bank– are reining-in their metaphorical horns. And that's led "many would-be consumers to buy cheaper models, or purchase a used vehicle instead. If customers with shaky credit can get loans at all, often they must make a bigger down payment, pay higher interest rates and accept loans of shorter duration." And here's the kicker: "Consumers with subprime credit ratings buy nearly 30 percent of all new vehicles." Oh wait, that's not the kicker. This is: "Dealers are more dependent than ever on automakers' captive lenders. The captives appear more willing than independent lenders to make subprime loans in what is shaping up as the worst year in a decade for new-vehicle sales." Which will be true (the loan part) right until it isn't. And if GMAC goes down, look for all Hell to break loose.
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The fact that for the last few years banks even lend large amounts of money to and even pursued a category labeled “sub prime” speaks volumes of why we are in the mess we are in.
I just paid off my 2006 Xb and I don’t plan on buying another car for 8 years, but thats just the way I have always been with my money.
I have a good friend of mine who hasn’t sold a single car in 2008. In fact, he’s converting his car lot to an impound lot so that he can handle all the new repo business with the banks.
Back in October I actually sold more used cars than many of the full-time car dealerships (new and used) in the area. Out of those 16 cars that I sold, 15 were $3500 or less. The other one just came over at $3900.
Since then my sales have been off about 50%. Then again, this isn’t my primary work and I’ve always done cash deals only.
But on the positive side: For those people who have good credit and are in the market for a new car, this is going to be a great year for those consumers.
Personally, I’m looking forward to my new car but this can’t be good for the domestics that had a pretty bad 2007 and need strong sales to be able to implement their recovery plans.
he’s converting his car lot to an impound lot so that he can handle all the new repo business with the banks.
Probably the single best strategy in the auto market today.
Good luck to you in your enterprise Steven.
I agree with the poster above – if I was in the market for a new or slightly used car now, I’d be ruthless. (FYI, I recently saw a 2006 Ford Five Hundred with 12,000 miles marked down to $11k…now that’s depreciation!)
There IS no positive side when you have a regular job and a mortgage (sub-prime, at that), a car payment (at least it’s an Accord), and driving is one of your (my) favorite things. I don’t mean to be the downer, but most of us out here live in the real world. With real problems.
I’ve got an $18/hr Government job and good credit(805 FICO). The bank I’ve been with my entire life recently would only pre approve me for an $80,000 home loan. What happened to the days when they’d literally loan any amount to anyone?
I told them to keep it as I couldn’t buy anything decent with that pittance of an amount. Who needs that money more: me or them? I guess them. Pretty sad when a bank is hard up for eighty grand.
Thank you, rtz. Glad you’re “down here” in the REAL WORLD with the rest of us!!! That was refreshing.
(And I do NOT in any way mean that in a derogatory fashion. We are in practically the same sinking boat…the middle class.)
And I don’t think we have strayed too far from the subject. Sorry if we have, Mr. Farago….we still love you!!!!!