edatoakrun
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Falling car prices + subprime lending =

Mon Apr 03, 2017 8:32 am

After years of Auto manufacturers increasing production and sales by increasing discounts delving ever-lower into the subprime market, It's now a buyer's market for both new and used cars.

Ford, Chrysler Sales Disappoint as Cars Plunge Despite Discounts

Automakers’ U.S. sales trailed estimates, with Ford Motor Co. and Fiat Chrysler Automobiles NV reporting the biggest declines, as heavy incentive spending failed to keep struggling sedan and compact models from plunging. Shares fell.

Deliveries slumped 7.2 percent at Ford and 4.6 percent at Fiat Chrysler last month. General Motors Co. sales climbed 1.6 percent, a smaller gain than analysts projected, while Honda Motor Co. reported a surprise drop.

The results cast doubt on expectations that industrywide U.S. auto sales would bounce back following declines in the first two months of the year...

“Sales are under forecast, and there were a lot of incentives during the month,” Michelle Krebs, an analyst with Autotrader.com, said by phone. “Before long, we will see more production cuts.”...

https://www.bloomberg.com/news/articles ... cord-civic

USED MARKET UPDATE
In a reversal of what typically occurs in February, wholesale prices of used vehicles up to
eight years old fell substantially last month, dropping 1.6% compared to January. The
drop was counter to the 1% increase expected for the month and marked just the
second time in the past 20 years prices fell in February (last years’ scant 0.2% being the
other instance).
NADA Used Car Guide’s seasonally adjusted used vehicle price index fell for the eighth
straight month, declining 3.8% from January to 110.1. The drop was by far the worst
recorded for any month since November 2008 as the result of a recession-related 5.6%
tumble. February’s index figure was also 8% below February 2016’s 119.4 result and
marked the index’s lowest level since September
2010...

http://img03.en25.com/Web/NADAUCG/%7B83 ... 201703.pdf

Some analysts now project rather dramatic future deflation in vehicle prices:

How much Morgan Stanley thinks used-car prices will crater — in one chart

...Here’s great news if you’re looking to buy a used car — or a reason to move fast if you’re selling one.

Prices for previously owned vehicles will decline by 20% over the next four years, and they might plunge by as much as 50%, according to Morgan Stanley’s projections.

The big bank has put out the chart below, saying the 20% decline is the most likely scenario...

http://www.marketwatch.com/story/how-mu ... 2017-04-03

Which may have substantial effects on the larger economy :


Here’s why it’s getting harder to ignore rising subprime auto defaults


...Subprime auto-loan default rates match those seen just before the 2007-2009 recession. It’s a red flag that’s been flapping for some time for analysts worried it could pose risks to the broader credit market, bank health and, ultimately, the consumer-driven economy...

http://www.marketwatch.com/story/heres- ... 2017-03-30

Who could have guessed this was coming...

https://www.youtube.com/watch?v=4U2eDJnwz_s
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User avatar
LTLFTcomposite
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Re: Falling car prices + subprime lending =

Mon Apr 03, 2017 10:51 am

Simple solution: Make all consumer lending non-recourse.
LTL
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RonDawg
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Re: Falling car prices + subprime lending =

Mon Apr 03, 2017 4:44 pm

As much as I think that those who prey on the "credit challenged" are scum, I also wonder if this wouldn't be such a problem if America did a better job educating its young about finances, and financial responsibility. The subprime lending industry exists partly because the government allows it, but also because there is demand for it. A great demand according to all these articles I come across regarding BHPH and subprime lending.

A lot of people are so focused on the "monthly payment" they fail to see the financial forest for the trees. That's how people end up paying $13k for a car actually worth $3k as John Oliver mentioned.

This article from Jalopnik shows how someone, through just a couple of financial missteps, ended up paying a whopping $900/month FOR 85 MONTHS just to own a Toyota Tundra: http://jalopnik.com/what-to-do-when-you ... 1788572217 It was totally avoidable.
Blue Ocean 2012 Leaf SV, lost that 1st bar on 11/21/2015 at 26,435 miles.
Lease returned on 12/23/2015. Final LeafStat figures: 225 Gids, 17.44 kWH, SOC 91.89%, SOH 82.36%, 69.49% HX, 54.57 Ahr, battery temp 61.8 F
Now driving a 2015 VW eGolf SEL

User avatar
LTLFTcomposite
Posts: 4204
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Re: Falling car prices + subprime lending =

Mon Apr 03, 2017 6:41 pm

And best of all you don't have to be stuck in the base model!
Pretty much sums it up right there. God forbid you suffer the indignity of driving around with wheel covers in a car you're giving back in three years.
LTL
White 2012 SV delivered 10 Dec 2011 returned 25 Nov 2014 replaced with stopgap ICE Sentra
[35 months] [35K miles] [9 Bars]
2013 Volt replaced after 36 months/30k miles with ICE Rogue

edatoakrun
Posts: 4563
Joined: Thu Nov 11, 2010 9:33 am
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Leaf Number: 2184
Location: Shasta County, North California

Re: Falling car prices + subprime lending =

Fri May 12, 2017 5:24 pm

Deflationary trends in the market, for both new and used vehicles, already seem to be accelerating.

Makes you wonder what could happen when the next recession hits...


U.S. used-car glut is a dealer’s dream, automakers’ nightmare

...By the end of 2019, an estimated 12 million low-mileage vehicles are coming off leases inked during a 2014-2016 spurt in new auto sales, according to estimates by Atlanta-based auto auction firm Manheim and Reuters...

Consumers seeking great deals are in luck. Used-vehicle prices at auction fell about 3 percent last year, according to Carmel, Indiana-based KAR Auction Services Inc (KAR.N), which facilitated the sale of 5.1 million used and salvaged vehicles in 2016. Used prices should drop around 3 percent annually for the next couple of years, according to KAR's chief economist Tom Kontos...

Demand for new vehicles is slowing after seven consecutive years of rising sales. Meanwhile, carmakers' discounts on new vehicles have surpassed record levels set during the Great Recession. Those discounts have been averaging over 10 percent of a new vehicle's average selling price, according to industry consultants J.D. Power and LMC Automotive...

http://www.reuters.com/article/us-autos ... ss+News%29

And now the price collapse from oversupply is also hitting the right lane:

Trucking Industry’s Tale of Woe: Too Many Big Rigs

A glut of used heavy-duty trucks means some long-haul carriers are ‘upside down’ on their rigs, owing more than the trucks are worth


A glut of used big rigs is weighing down trucking companies already mired in a prolonged slump in the freight market.

Many fleets bought scores of new trucks when transportation demand was booming a few years ago. Then U.S. manufacturing activity flagged and import growth slowed as retailers rang up disappointing sales. Freight volumes started stalling out in late 2015, leaving too many trucks competing for cargo.

Large long-haul trucking companies typically run a truck for three to five years, then trade it before the warranty expires. Repair and maintenance costs tend to skyrocket after about 500,000 miles.

Now, trucking companies are trying to trade in vehicles following one of the steepest plunges in used-truck prices since the recession. Some carriers are “upside down” on trucks in their fleets, meaning they owe more on a vehicle than it is worth...

https://www.wsj.com/articles/trucking-i ... 1494581408
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tattoogunman
Posts: 98
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Location: Plano, Texas

Re: Falling car prices + subprime lending =

Mon May 15, 2017 2:45 pm

RonDawg wrote:As much as I think that those who prey on the "credit challenged" are scum, I also wonder if this wouldn't be such a problem if America did a better job educating its young about finances, and financial responsibility. The subprime lending industry exists partly because the government allows it, but also because there is demand for it. A great demand according to all these articles I come across regarding BHPH and subprime lending.

A lot of people are so focused on the "monthly payment" they fail to see the financial forest for the trees. That's how people end up paying $13k for a car actually worth $3k as John Oliver mentioned.

This article from Jalopnik shows how someone, through just a couple of financial missteps, ended up paying a whopping $900/month FOR 85 MONTHS just to own a Toyota Tundra: http://jalopnik.com/what-to-do-when-you ... 1788572217 It was totally avoidable.


Part of the problem is the sheer cost of most products in our marketplace, cars especially, and it leaves many people with no real choice than to get these loans. Younger people are in a position where they are not making as much money as their parents were and the only way they can afford to buy things is through financing - something that should not necessarily be seen as a bad thing to do. Low income people also have few choices when it comes to these things. I'll give you an example - I'm a born again college student in my 40's and I'm also credit challenged. I used to make good money back in the day, but stuff happened and we are basically trying to start over now that we are middle aged. My credit is getting better by the month, but my income is not. I'm due to graduate at the end of the year, but I harbor no illusions regarding what kind of pay I will probably be able to get out of my next job.

I figure that, if I am extremely lucky, I may be able to get a job paying $35K to $45K a year and that is about the national average (in the U.S.) right now for people with a BA degree (stats available online, look them up). Factor that into a U.S. median household income figure hovering around $55K a year (again, stats readily available online), you can begin to see where people get sucked into these things. It's easy for people (I'm generalizing here and not singling anyone out) who have money to criticize people who get into these situations, but many of them simply do not have a choice when they have family obligations, crippling student debt they are trying to deal with, poor salaries, high costs of living, etc. The result is that we get taken advantage of since we have no real alternative choices. I'd also like to point out that I am talking about necessities here (like transportation and housing), not someone who is poor trying to buy expensive stuff that they simply do not need ;)

edatoakrun
Posts: 4563
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Re: Falling car prices + subprime lending =

Tue May 16, 2017 2:43 pm

To maintain profits in a deflationary market, Ford plans to reduce costs the old-fashioned way...

Ford to cut North America, Asia salaried workers by 10 percent: source

Ford Motor Co (F.N) plans to shrink its salaried workforce in North America and Asia by about 10 percent as it works to boost profits and its sliding stock price, a source familiar with the plan told Reuters on Monday.

A person briefed on the plan said Ford plans to offer generous early retirement incentives to reduce its salaried headcount by Oct. 1, but does not plan cuts to its hourly workforce or its production.

The move could put the U.S. automaker on a collision course with President Donald Trump, who has made boosting auto employment a top priority. Ford has about 30,000 salaried workers in the United States.

The cuts are part of a previously announced plan to slash costs by $3 billion, the person said, as U.S. new vehicles auto sales have shown signs of decline after seven years of consecutive growth since the end of the Great Recession.

The Wall Street Journal reported Monday evening that Ford plans to cut 10 percent of its 200,000-person global workforce, but the person briefed on the plan disputed that figure. The source requested anonymity in order to be able to discuss the matter freely.

Ford declined to comment on any job cuts but said it remains focused on its core strategies to "drive profitable growth"...

http://www.reuters.com/article/us-ford- ... SKCN18C03P

Toyota seems to be trying another approach, though exactly what that is is not clear to me from the article below:

Toyota president feels ‘a strong sense of crisis’ as era of zero-emission and autonomous cars approaches

SQUARING OFF AGAINST AN UNCERTAIN FUTURE, AKIO TOYODA SEEKS TO MAKE HIS COMPANY MORE NIMBLE

May 15, 2017

Not long ago, Toyota engineers prepared a special treat for President Akio Toyoda, with an eye to the electrified future. It was an all-electric version of his beloved Toyota 86, the sporty coupe Toyoda had a personal hand in creating and still drives today in rally races.

Toyoda took the modified car for a spin. He wasn't impressed.

"The first question I got was: "What is your impression?'" Toyota's self-proclaimed "master driver" recounted last week to Automotive News. "And my answer was, "It's an electric car.'"

His disappointment spotlighted a key challenge confronting old-guard automakers in a rapidly changing industry. Like other traditional metal-benders from Detroit to Wolfsburg, Toyota Motor Corp. finds itself struggling to mold conventional ideas about what a car should be into the new reality of zero emissions, autonomous driving and on-the-go connectivity.

"What I meant was, for an OEM manufacturer, you're choking yourself. It is commoditizing your vehicle," Toyoda said of the proposition of next-generation battery-powered cars.

The conflict was on full display in the latest earnings report Toyota released last week. The company reported a 21 percent tumble in net income for the fiscal year that ended March 31 and warned that net income was poised to fall again, by 18 percent, in the current fiscal year.

That would be the first back-to-back net profit decline in more than 20 years for the company founded by Toyoda's grandfather. In announcing the gloomy results, Toyoda minced no words.

"I feel a strong sense of crisis," he said...

http://autoweek.com/article/car-news/to ... omous-cars
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edatoakrun
Posts: 4563
Joined: Thu Nov 11, 2010 9:33 am
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Re: Falling car prices + subprime lending =

Wed Jul 05, 2017 7:47 pm

This Dealership Is Actually Offering A Bad Credit Score Rebate

Automakers have come up with some creative incentives and rebates in order to make the sale price a bit more palatable. One of the more, uh, interesting ones is a rebate offered by a Fiat Chrysler dealer for having a low credit score...

The rebate that I found, though, wasn’t on some affordable compact, it was on a $55,000 pickup. While everyone’s financial situation is different, if your FICO score is under 620, dropping over $50,000 on a brand new truck is not the smartest move.

http://jalopnik.com/this-dealership-is- ... socialflow

Car buyers stretch loan payments to record lengths to get in pricier vehicles

As car buyers’ obsession with bigger, pricier vehicles grows, so does their willingness to take longer to pay for them, says new analysis from Edmunds.com.

The average auto-loan length reached an all-time high of 69.3 months in June. That’s 6.8% longer than five years ago, said the site that provides auto industry statistics and news.

The average amount that buyers financed was hit with the biggest uptick for the year last month, at $30,945, or up $631 from May. The financing trend also lead to the highest monthly payments for the year, now averaging $517, which increased from $510 in May...

Of course car depreciation can mean that borrowers find themselves in an upside-down loan pretty quickly...

http://www.marketwatch.com/story/car-bu ... 2017-07-03
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rmay635703
Posts: 398
Joined: Wed Jan 19, 2011 7:43 pm

Re: Falling car prices + subprime lending =

Thu Jul 06, 2017 12:04 pm

Buying larger, more expensive, less reliable vehicles isn't a need.

I grew up riding in a Yugo or on a 125 depending on which parent was driving.

Amazingly, we were able to go about the day to day just fine.

edatoakrun
Posts: 4563
Joined: Thu Nov 11, 2010 9:33 am
Delivery Date: 15 May 2011
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Location: Shasta County, North California

Re: Falling car prices + subprime lending =

Mon Aug 21, 2017 4:09 pm

You may jave noticed recently that it's a great time to pick up a cheap Tesla...

Or a Bolt...

Or a LEAF...

Or, just about anything on wheels, actually.


Your Car Is Now Worth Less Than You Think


A glut has used-car depreciation accelerating at a breakneck pace.


Car sales in the U.S. have been rising for seven consecutive years now, and it’s denting the value of whatever is currently parked in your garage or driveway. With so many new cars rolling out of dealerships lots and instantly becoming used cars, the secondary market is glutted and the pace of depreciation is rapidly accelerating.

Your not-that-old car might not be a clunker quite yet, but it’s probably a lot closer than you think.

The average used car lost 17 percent of its value in the past 12 months, dropping from $18,400 to $15,300, according to data from Black Book, an auto analytics company. That annual depreciation figure has been increasing steadily, too. The average used car today depreciates nearly twice as fast at it did in 2014, when the annual rate was just 9.5 percent...

Automakers, having added manufacturing capacity, are also offering larger incentives on new vehicles just to maintain their record sales momentum. That puts downward pressure on the entire market, according to Hallett, even for used cars.

Consequently, the number of drivers who are upside down on their car loans is surging. Americans are paying—or trying to pay—108 million auto loans at the moment, according to the most recent Federal Reserve data. That represents roughly half of licensed drivers in the U.S. At the same time, 14 percent of Americans have a negative net worth. Among those who have more debts than assets, the Federal Reserve says auto loans make up between 10 percent and 23 percent of their total financial obligations...

The upside is that America is in the midst of a buyer’s market for used vehicles. In 2012, the average three-year-old vehicle was selling at 26 percent off its original sticker price on Cargurus.com, an online platform listing some 2.5 million vehicles. A three-year-old car is currently trading at a 34 percent discount from the sticker price, said Cargurus spokeswoman Amy Mueller.

A cheap used car hasn’t been this cheap in quite some time.

https://www.bloomberg.com/news/articles ... -you-think
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