Why the car dealerships are folding

Discussion in 'Economics' started by Pekelo, Dec 26, 2008.

  1. Pekelo


    Interestig take on it:

    " I asked this Bergey’s manager if the problem was that the banks had frozen lending, making it hard for people to buy new cars.

    He laughed. “There’s no problem getting car loans from the small community banks around our dealerships,” he said. “They’ve got plenty of money to lend, and they’re happy to lend it to car buyers. The problem is that people are too worried about the economy and about their jobs to go out and buy a new car.”

    And that’s it in a nutshell."

  2. Improved reliability is another real issue.
  3. Of course people are worried about going out and taking on more debt. For the first time in a decade, the sheeople are actually using their heads, the brain that is in that head.

    The media is nothing but 24 hour 'bad News", they are definitly milking the issue but the reality of the facts stand on their own.

    Small regional banks and local banks are lending. However, they have all ways had a very strict lending practice. That is why the "Poor" and "Straped" middle class went to Multinational Banks. (The very ones that are now bankrupt).

    If you have a solid credit score, good history in Employment and assets, you can have plenty money loaned to you from Local/Regional banks. However, that is a small % of consumers.

    Not to mention the shipyards stacked with new cars, so deep that there is talk of halting all auto imports and have ships sit off the coasts holding inventory. Nothing is moving.

    So, once again "Cash is King". The rules have been changed and OBAMA, the FED, WallStreet can push "Credit" all they want, the new trend is CASH.

    Im with the camp that believes 09 is going to be when the worst hit. Consumer spending will hault (as we will see in the next few retail sales reports), housing should fall another 15% to 20% from current levels. (As we see the defaults picking up pace in the last report and reports going forward), Unemployment to reach 12% to 13% IMHO.

    So, if the camp that I am a member of is correct, it will be interesting to see where the Auto goes.
  4. would a 5% year over year decline count as a "halt?" or deos that just put us back at 2007 levels?

    just trying to be sure I understand what you're saying.

    (I'm in the same camp as you, btw).
  5. =========================
    EMR-GLO, excellant.

    A slight difference of opinion on the well run generally, commmunity banks, regional banks. A banker friend of mine ,community bank, said we are lending, as long as we think we will get our money back. So wouldnt call that strict..........................

    Shopping around, for car since Sept, great month to buy cars usually;
    but STILL looking for a cash/great buy , great [not just ggod]buy .
    Looking @Honda, TM, NISANY, or GM-Saturn, reguardless if GM goes bankrupt.

    While they are lowering prices some[good gas milage cars];
    a perhaps fatal flaw in many new car auto dealers,
    is simply overpriced autos-BUT they finance it.LOL

    New car is a luxury, [all become used upon driving off dealers lot]used car is a necessity for some. While all car dealers are not crooks;suprising how many try to cheat/pressure me-''when i ask for the CASH drive out price''

    :D O% GMAC 60 month,LOL financing may fool a few;
    but not those who wisely study the bid/ ask/depreciation of a new car. Used car dealers ,cash wise or otherwise may prosper.
  6. Selling cars is a horrible business. Worst of everything. Union employees in repair side, incredible competition, labor intensive, low margins, capital intensive.

    Friend's family owned a Ford dealership in Bay area for 40 years. He said for the last few years all the profit's came from the repair side and financing rebates. Profit on cars were basically zero.
  7. I bought a used Toyota Solara for NYC driving only (didnt want to get my other car all banged up by parking and driving there) with 157000 miles on it. $3300+600fees/taxes+1700 for repairs. Runs great, quiet and it seems like this would be strong enough to go another 100k miles. I would honestly trust it on a cross-country trip.

    There is no reason to buy a new car right now especially when your existing car will probably last another few years with 1-2k in repairs. I could easily drive this Toyota for another 5-6 years if I chose.

    Actually, Im never letting go of this thing. Everyone needs a beater in their life for snow driving and NYC trips.
  8. Great deal.
  9. They are out there. Absolute stupidity is using anything else besides a sub-10k car for NYC. I have seen guys drive around in new Mercedes and BMWs around NYC and parking them on the street. Its common for vehicles to get towed (my Toyota was towed once already), people to push your car into the next one to get more room to get out of the space (I do that all the time) and for random people on the street to vandalize your car. One time a few years ago, I was too close to one car and smashed someone's mirror with mine. My mirror was stronger and the other guy's mirror disintegrated. Mine just had a scuff.

    When the snow plows or garbage trucks come, they will sometimes hit or scrape the cars. Then there are the enormous potholes. My buddy hit a big pothole in a BMW and the front aluminum suspension of his car became bent. $3000 in repairs later, all was fine.

    The only car I would take into NYC is the cheapest beater I can find and thats what I got just for that purpose. I am absolutely convinced that Toyota makes the finest cars in the world. 158,000 miles (all tri-state area miles) and runs strong.

  10. Texrex and Murray the Turtle....Good points.

    Texrex, I would say that sales numbers of the last two quarters are close to "Stop" as you can get, for now. I do think sales of New Cars will drop further and the biggest decline will be in the months going forward.


    Sure, I would imagine that all local and regional banks will lend if it looks like they will get their money back. So, their lending standards reflect that "Want". For example: I don't think you can be a day labor in Texas, with out a w2, no assets, with less than a grand in the bank and go to "Frost" to acuqire a loan.
    On the same not, I do not believe you can be a 9 2 5er, in Debt, making the average salary for that region, and think you will get a loan. This is camp is the majority of the people in the US.

    So, while your banker friend is correct in that they will lend if they get their money back, I would believe he means to individuals who qualify under their "Strict lending rules. Otherwise, his bank will be part of the expect 1000 to go under in 09.

    Also, if you look at the car (sticker prices) prices compaired to the "Panic" the Big 3 show, sure in the hell does not seem as if they want to push those cars off the lot. I have yet to see in San Antonio (Not really in the market for a US car) any true drop in prices for Ford, GM, etc. I do see 10 year financing now with zero down and zero % for 7 years. But the prices seem to be the same.
    #10     Dec 26, 2008