By on September 11, 2011

U.S. auto sales will probably come in lower than 13 million this year, Ford’s CFO  Lewis Booth told Bloomberg. That’s below the low end of Ford’s estimate.

According to Bloomberg, “Ford had forecast industry wide 2011 sales of 13 million to 13.5 million vehicles, including medium- and heavy-duty trucks, in its home market.” Booth is not alone with his prediction that we will see less than that. Analysts are cutting their forecasts. Last month, the average estimate of 18 analysts surveyed by Bloomberg was 12.7 million.

As for the fabled pent-up demand, it seems to be in hiding.

“We see signs of pent-up demand,” Booth said at a UBS conference in London. “What it’s going to take for that pent-up demand to emerge is some confidence in what the future will look like.” Ford anticipated a modest U.S. recovery, “but we didn’t expect it to be quite as slow as it’s been.”

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73 Comments on “Pent-Up Demand AWOL: Less Than 13 Million Sales Expected For This Year...”


  • avatar
    ciddyguy

    Really, this shouldn’t surprise anyone, especially the auto industry,t hanks to lower wages and many still unemployed. All it takes is a quick glance at the papers to see what’s NOT going on with the economy.

    Then again, the US DID expect better results than they have so…

  • avatar
    jhott997

    This “pent up demand” will stay pent up unless and until housing prices recover. Any economist at any of the OEM’s who dismiss the effects of the housing collapse will do so at their peril…
    House prices will never “recover” and it will take time for people to establish positive equity in their houses; in most cases this will be 10+ years. In the meantime, cars will continue to be purchased only when absolutely necessary.
    I have said it once to my friends, and I have said it 1,000 times, cars are TO DAMN EXPENSIVE! If the average person has to finance, or even lease forever, the car for 60+ months then the system is unsustainable.
    Cars are consumable appliances to the majority of folks and they will simply keep the appliance longer.
    The manufacturers would do themselves a service to concern themselves with “serviceability”. In my 10 years working in powertrain product development with a big OEM this was not a concern. As time moves on don’t be surprised to see some small marketing efforts around this idea…..
    Finally, everyone should be happy that 12.5 million cars will be sold this year. 2012 has the potential to be worse…

    • 0 avatar
      charly

      People not buying houses is historically linked to people buying cars so i think what you are saying is wrong. The reason is that the economy of the US is doing really poorly.

      • 0 avatar
        jhott997

        ?

      • 0 avatar
        jhott997

        Charly,
        I am not sure I understand your point.
        My point is that we are currently in a macro-economic period of severe credit deleveraging. We have been living well beyond our means in a credit fueled “debt” bubble marketed/disguised as an “asset bubble”.
        Housing and car “sales” suffer when credit in a depression like it is. People buy cars on credit, like it or not. When there is no credit or when credit worthy individuals don’t want more debt then sales of cars suffer.
        The “the economy of the US is doing really poorly”, as you say, because of this credit depression.
        I don’t see any of this changing any time soon. In fact, I see it getting worse as the crisis in the EU escalates this fall and the mid-east falls into anarchy.

        Shoot, people don’t want a car note/loan because they need to save!!!! Have you looked at the CD rate on a 1- year certificate of deposit lately!? Pretty soon the banks will be charging to deposit money; oh yeah, they already are…… To large depositers……….

      • 0 avatar
        charly

        If you look at the historical record for home buying and car sales for the US and other first world countries than there is big correlation between low home sales and high car sales as people who don’t move have more disposable money to buy cars

      • 0 avatar
        jhott997

        interesting. Can you provide some data to prove this correlation? I have never heard of such a thing.

    • 0 avatar
      jimmyy

      On the east coast, home prices are only a little off the high, and far higher than 2000. Why? Our businesses do not suffer from unions. Only our public system has this problem, but Republicans will be elected soon and put an end to public union cancer.

      • 0 avatar
        jhott997

        jimmyy. Not sure what the unions have to do with the house prices. either way…

        Have you tried to buy or sell a house in the current market?
        There is more to the market than the simple “price of the house”. The pathetically slow pace of home sales in all regions shows 1) home prices have not fallen enough to persuade buyers to step in, 2) potential buyers don’t want to take on debt of a mortgage in a market where the real prices can’t be established, 3) prices have not fallen enough because sellers simply can’t afford to lower their sell price.
        Again, the anemic pace of house sales says prices are too high and will continue to fall until an equilibrium is found.
        Unless and until mortgage debt is deleveraged the sales of cars and other appliances will continue to suffer/languish. At some point very soon there will be downward price pressures on the car industry and combined with continued excess manufacturing capacity this will kill off more OEM’s. This time, however, there will be no bailout……

      • 0 avatar
        Loser

        jj99 jimmyy,

        Your lack of subject knowledge combined with your arrogance is always good for a laugh. Add the housing market and politics to the list of items you know nothing about.

      • 0 avatar
        morbo

        East Coast of what?!? CHINA???

        Seriously JJ99, you’re funny when you D3 bash, but now you’reranting for the sake of ranting. I know me quite a few union guys in New Jersey, Philly, Baltimore, DC, NYC, Boston and Rhode Island that would disagree. Construction unions, Port Workers Unions, Casino unions, Trades Unions, Hospitality Unions, Transportation (airline) Unions…

        As far as housing stock, please specify which state specifically housing is ‘far higher’ then in 2000? Having bought and sold throughout the 2000′s in NJ and VA, I have first hand experience that what you speak is inaccurate.

      • 0 avatar
        mazder3

        Guys, why do you take jimmyy seriously? He resides under a bridge. If you feed him, he grows more powerful. IGNORE HIM!!!

  • avatar
    Zackman

    “…cars will continue to be purchased only when absolutely necessary.”

    Absolutely – except for certain vehicles like Camaros, Mustangs, etc. Otherwise, people are buying “appliance” vehicles when they need them or under a false sense of fuel economy, not taking in the cost of spending lots of cash on the purchase price!

    Our daily drivers are getting old, too, but I’m not going to replace any unless an unexpected serious issue arises, only then will I run the numbers and make a decision.

    • 0 avatar
      charly

      You forgot to mention all BMW etc. or trucks with leather or most Camry’s.

    • 0 avatar
      geozinger

      Zackman: Excellent observation. A couple of days ago, as I was driving my 14 year old 250000 mile Chevy to work, I noticed that many of the cars that were on the road at the same time were a similar age as mine. At least within four or five years.

      The cars from the mid-late 90′s are pulling close to double duty, as many of these cars have already had one life. I’m not talking about a beater car for teenage kids, as some of my contemporaries are still driving the same car they were approximately ten years ago. Other contemporaries who have encountered rough time are buying cars from the late 90′s and early 00′s because they can’t afford anything else.

      • 0 avatar
        Zackman

        @geozinger:

        You know, for all my (somewhat) joking about raving for Impalas and wanting a new one, I really have to wonder if I’ll buy a new car as things stand right now. With a 100-mile commute daily, that’ll just tear up a new new car pretty quick. I have to believe if my Impala goes south and I have to replace it, it’ll most likely be something used, 2-3 years old. Daily highway driving in traffic with lots of semis is rough on any car with all the rocks, tire shards and other stuff being tossed around on the roads. My once-pristine headlight lenses are beginning to resemble a 1-year-old Chrysler’s perpetually-fogged ones!

    • 0 avatar
      highdesertcat

      People who have money still buy new cars, usually at the end of the warranty period of their car. There are just fewer people who still have money these days and who consider a new car an absolute necessity.

  • avatar
    gasser

    Cars sell on the financing.
    As more people lose the idiotic idea of Home Equity to finance a car with a ten year home loan, sales fall. As the trade in equity on a four or five year old gas guzzler truck falls, sales fall. As gas goes up and people’s car budget stays the same or shrinks, sales fall. Leases are a way of getting sales, but since fewer leases went out 3 years ago, fewer lease returns spark new sales/leases.
    Lastly, how complicated is it?? Two job family = two cars. One job family = one car. No job family = No car!!!

  • avatar
    dzwax

    Everyone wants a new car or truck. The only new cars and trucks I see on the road now are driven by the elderly gated community set. Middle class and the young cannot afford the payment and the gas. Is there any demographics on exactly who is buying cars now?

    • 0 avatar
      LectroByte

      Really? Two of my neighbors have bought new pickups in the last year, and we are far from the elderly upper class, the only gates here keep the cows from getting out of the pasture. Folks are not trading as often as they used to for sure, but it’s not just the “elderly gated community set”. Seems to have picked up quite a bit in the last year or so from what I can see.

  • avatar
    Crosley

    The auto industry is going to have to adjust to lower automobile sales for a while. It’s a lethal combination of credit contraction and uncertainty about the future.

    Let’s be honest, for most middle-class families, it would be financially irresponsible to have such an indulgence like a new automobile. I would argue even in good times it’s just plain stupid for an average American household to be buying a $30k plus automobile.

    Culturally, America has changed regarding their spending habits. Long term it’s a good thing, but it will be painful for a while with a domestic economy so dependent on consumer spending.

    • 0 avatar
      jimmyy

      A record percentage of vehicles on the road are Japanese, and those last for 200,000 miles and more. People just don’t need as many cars.

      Only those stuck with Detroit cars need to replace them because they do not last.

      • 0 avatar
        BigDuke6

        “A record percentage of vehicles on the road are Japanese, and those last for 200,000 miles and more. People just don’t need as many cars.

        Only those stuck with Detroit cars need to replace them because they do not last.”

        Wow..this guy really is a MORON. Or is he just trolling…..?

    • 0 avatar
      jhott997

      i completely agree with you! You are spot on. We are in the midst of a structural change in the economy. The next decade is going to be viewed as a “struggle” by those who want to go back to the credit induced spending binges of the 80′s 90′s and 2000′s. For the rest of us who accept this change it will be liberating. Specifically, for the car industry, the excess capacity is going to be something that they will have to deal with. There still are too many OEM’s and in the long term more will die off.

      I love cars. I love to drive. I indulge in a BMW M3, it’s my “hobby” so to speak.
      But, even I question this indulgence right now.

      My point is that if I struggle to justify the “cost” of owning a car then 99% of other people really struggle and to them it is increasingly making no sense to leverage their finances with more car related debt when they already have a house in an unstable market, they are facing educating children, financing retirement, etc. You get the point. The car is just not as important anymore. The phone one carries is a status symbol, a car, generally, no longer is…..

      Again, cars are TOO DAMN EXPENSIVE!!!!! If people have to lease in perpetuity or finance for 6+ years then the industry in the long term is doomed.

      • 0 avatar
        Bill Wade

        The car is just not as important anymore. The phone one carries is a status symbol, a car, generally, no longer is…..
        ———————————————————————–

        No question this is true with a large percentage of the younger demographic.

  • avatar
    dwford

    For years economists urged us to stop spending, stop borrowing and save. Now that we are doing that, the response is to lower interest rates and to urge us to borrow and spend!! Hello?

    I see very conservative customers coming in who are concerned about the total cost of ownership – monthly payment, insurance, gas, etc.. Very few people coming in to trade just because they feel like it.

    • 0 avatar
      mike978

      You are exactly right and it is called the new normal. Americans have gone from having an average savings rate that was negative in the early 2000′s (i.e they spent more than their annual income) to one where they are now saving around 5%. Still not great but much better, however the flip side is that over 5% of income has been diverted from buying stuff to saving. Hence the lower consumption and ripple effects in the economy. This reality would be with us regardless of who won in 2008. It will also be with us for another 5 or so years I suspect.

  • avatar
    Conslaw

    There are multiple factors here that conspire to keep the sales down.

    First, pre-2008 sales were inflated by users who were borrowing (directly or indirectly) the equity from their bubble-inflated homes. Now, 40% of homeowners are “upside down” in many areas, and a substantial number of homeowners are practically upside down because sales expenses would eat up any equity that they have. For many of these folks, their home equity was their only real asset. Poor performance by stocks and bonds mean that to save for your future, you actually have to sock away the money rather than depending upon investment returns. Don’t even get mes started about the rising cost of college.

    Second, the whole jobs thing. When you are out of work or face the prospect of being laid off, it’s not a time to pile on new debt.

    Third, after postponing car purchases for three years now, consumers are beginning to learn that modern cars hold up a lot better than the cars of a generation ago. Even an average new car is in good shape at 100,000 miles. In the 1970s and 80s, a 100,000 mile car was a hooptie,

    • 0 avatar
      jhott997

      good point #3, Conslaw. As people have been forced to “hold on” to their cars longer, for financial reasons, they have realized their car is just fine and is not going to fall apart at 100,000 as their g-pa’s car did, and 2) they have spent excess money on other things and realize the car they drive really doesn’t matter as long as it is safe, reliable, and relatively easy on the gas consumption.

      • 0 avatar
        mike978

        point #3 is correct and that spells long term problems for the auto industry because the “spell” of replacing your car every 3-5 years has for a lot of people been broken through necessity. It will be hard for them to justify going back to the old ways even when times improve.

      • 0 avatar
        Scoutdude

        Mike people replacing their cars because of “necessity” every 3-5 years has not been the case for a long time. People were replacing their cars so frequently or doing short term leases because they could. People like having then newest greatest what ever it is, either from the basic joy of having a new toy or as a status symbol.

    • 0 avatar
      Robert.Walter

      And if the car becomes an instant hooptie, they can always take the cash they defered sinking into an unnecessary (but ego-boosting) car-purchase or lease (and hopefully saved) and sink it into a necessary purchase or lease.

  • avatar
    MrBostn

    Two job one car family here.

    We’re lucky that my work is on the way to her work. She drops me off daily. It’s a bit emasculating at times but I’m happy with the money it has saved us.

    I/we can afford to buy a new or used car if we wanted, but crappy used cars cost too much-new cars cost too much, especially when you add in 6.25% sales tax and excise tax. (MA has an excise tax based on the value of the car $25 per $1000)

    • 0 avatar
      Robert.Walter

      If you are feeling emasculated you are not selling it properly…

      For instance: “Wife cooks, cleans, AND drives me to work guys! How many of you have your wife under such good control??” (to preserve marital tranquility, and not be truly emasculated, you might first ask her permission to do this!)

      • 0 avatar
        MrBostn

        Like a personal assistant… Brilliant! ;) Monday I’ll sit in the back seat with some Grey Poupon.

      • 0 avatar
        mazder3

        @MrBostn

        Does your state do that if you purchase up here? If you get really desperate, Dodge Rams (1996-2000) are fairly inexpensive up here ($1500-4000) and are common as maple trees. Mileage is a killer (12-18) but they’re easy to work on and engines and transmissions are easy to find. Not much can go wrong on them, really. One would get you through the winter anyway.

    • 0 avatar
      MrBostn

      @Mazda3, No chance on avoiding it if I get MA plates.

      Excise tax is a local tax administered by the town you live in. This is documented when you go to the RMV and get your MA plates.

      People who live in MA, and have summer homes or family in NH often register their cars in NH avoiding the sales tax and excise tax.
      At times, the state of MA cracksdown on it, but I haven’t read about such crackdowns lately.

  • avatar
    Educator(of teachers)Dan

    Sales are lower and will stay lower. The industry does need to “get used to it.” I really don’t know anyone who’s shopping for a new (or even used) car right now. One of my colleauges who is normally a “trade for new before 60,000 miles” sort of person is even keeping longer because of economic circumstances.

    • 0 avatar
      CarShark

      That’s the bit that has me wondering what this industry will do to “get used to it” as you said. Lower prices across the board? Longer and/or more comprehensive warranties? Lower-cost models with few or no options? Some kind of price assurance a-la Orbitz where if someone from your area gets the same car for a lower price, you get a check for the difference? Some kind of rebate program a-la Best Buy where buying the newest version of your current car gets you money off? (I think they already do the last one.

      It’s one thing to convince a car shopper to choose your brand, but how do you convince someone to become a car shopper in the first place?

      • 0 avatar
        Educator(of teachers)Dan

        My thinking on the “get used to it” is lower manufacturing capacity, the problem is that no one wants to be the one to cut their capacity. Those who argue against the bailouts on free market economic grounds usually do on the argument of; “The sooner capacity gets cut, the healthier the remaining companies will be.” Less cars sitting around unsold means a healthier industry the problem is the industry has shown an ability to deliver 16 to 17 million cars, which means right now we have somewhere around 3 to 5 million excess car building capacity. And that’s just in this country, it doesn’t take world wide production into account.

      • 0 avatar
        charly

        Lower demand leads to higher prices as soon as excess production has been cut. But that often takes a very long time.

  • avatar
    Scoutdude

    Count me in as one of the pent up demand that doesn’t have the confidence to release the funds. I would have replaced the family truckster a couple of years ago. We need and use it’s cargo, passenger and towing capacity from time to time. So we made the decision to keep it until it dies. Then we picked up a used sedan paid for with cash that prevents the wife from putting about 10K per year of use of the SUV. The fuel savings make up for the added insurance cost and then some. With the first child entering college next year and the other not far behind I’m not seeing a new car in my future any time soon unless my net worth returns to more than just a fraction of what it was before the economy crashed or I win the lottery.

  • avatar
    jimmyy

    I told all about one month ago that European banks were on the verge of blowing up and Detroit is screwed. Someone actually called me a nut for projecting this. Ford is geting it, and reducing forecasts while Detroit lots are full of cars. Detroit was thinking it was going to take advantage of the Obama recall smear against Toyota and Honda, and the Japanese earthquake. Detroit stuffed their lots and raised the prices while snickering.

    Now, it appears that Toyota and Honda are lucky to have empty car lots. Perfect timing. Bad carma for Detroit. What goes around comes around.

    Now, we have the union demanding signing bonuses, retirement bonuses, and wage increases. This is enough to send buyers running for foreign vehicles. Wait till the media gets ahold of this.

    • 0 avatar

      We could have already been past this.

      We could have allowed the market to rightfully kill off two decrepit automakers, and with them a horribly (yet laughably) corrupt union, and taken our medicine in 2009.

      Today we would have been well on the road to a REAL economic recovery… but instead our leaders poured billions of money they did not have into the bailouts, and simply stalled the inevitable.

      And now will come the reckoning.

      • 0 avatar
        jhott997

        rob, correct!
        The auto “bailout” was always about a soft landing. This philosophy, however, will drag the “recover” into the next decade. I suppose this is OK if you a believer that the collapse of GM and Chrysler would have been catastrophic. Personally, I don’t and didn’t believe it.
        I am a firm believer that GM is hosed. They need to truly “right-size” their business and they need to do it soon. Nothing has changed inside GM; believe me…..

      • 0 avatar
        Scoutdude

        Yup, killing 100′s of thousands of jobs is always a good start to a recovery.

      • 0 avatar
        Scoutdude

        Jhott997, So you say that GM needs to right size itself and its hosed but yet their sales are still climbing and they are the YTD leader in MFG sales and their Chevrolet division is the YTD brand leader.

      • 0 avatar

        Yes, scoutdude, in this case killing tens of thousands of union jobs would have absolutely been the correct move. I prefer to play the long game — the one that recognizes it is better to kill some dead weight now, in order to grow much stronger down the line.

        Newsflash — the automotive market isn’t a jobs program.

        Also a newsflash – not everyone with a job deserves one.

        Or do you believe all those workers are “entitled” to a union job, at taxpayer expense? Really?

      • 0 avatar
        Scoutdude

        Rob, it’s not just the union jobs that would have went away. Their paychecks and those of the management and suppliers support other jobs. If those jobs would have been killed there would have been a chain reaction of other jobs lost. Many of the service industry business in the areas affected would close killing that many more jobs. Of course those people w/o jobs have a hard time paying their mortgages and rent so there would be that many more foreclosures.

      • 0 avatar

        …And in time, everything would have recovered, scout. Those people capable of finding new jobs would have done so, and those a bit too reliant on the “Jobs Bank” and union graft would’ve been dead in the water. Such is life.

        But now, we’re going to suffer the dreaded “double-dip” recession, and those jobs run a very strong chance of disappearing anyway. We could have been that much farther down the road to recovery by now had we let it happen, naturally, two years ago.

      • 0 avatar
        jhott997

        Scoutdude:
        “Jhott997, So you say that GM needs to right size itself and its hosed but yet their sales are still climbing and they are the YTD leader in MFG sales and their Chevrolet division is the YTD brand leader.”

        unit sales is NOT a sole indicator of profitability or ROI. If it was then GM would not have become insolvent with a “going concern” in 2009.
        The reality is that GM’s profit margin is about 3% in this market. Whereas the industry average is about 9%. Mercedes has been very open in the past that 8% margins is inadequate for a capital intensive business like auto manufacturing.
        GM is simply “too big” and if they wish to attract capital investment in the future they MUST reduce costs.
        Imagine if you managed $100 million in a pension or equity fund. You look at the business model of VW, Toyota, Ford and GM. You need a ROI for your investors. Are you going to invest in GM or Ford? GM or Toyota? I think it is clear that in the future GM has a severe problem attracting private capital investment just as it did leading into 2009 when it was insolvent.
        Personally, I have a lot of experience in GM and I can promise you that NOTHING has changed. The “culture” is as caustic and destructive as it ever was. In some cases it is worse because the “old school” feels threatened and they have dug in their heels. I predict that after the 2012 election, and the politics are somewhat removed, there is going to be a purging at GM of the “stranded middle” managers. It will be a good thing. Believe me.

      • 0 avatar
        mike978

        jhott – where do you get your data from. I thought the industry average was around 6-7% and GM was around the figure. I am going off the analyst report they gave out 1-2 months ago and reported here on TTAC. GM was mid pack for ROI with BMW leading the way. Mercedes was not doing well on that metric.

      • 0 avatar
        jhott997

        Mike978:
        Start here…
        Daimler
        http://www.bloomberg.com/news/2011-02-16/daimler-predicts-higher-2011-profit-fourth-quarter-net-misses-estimates.html

        or here

        http://finance.yahoo.com/news/Daimlers-Earnings-at-a-Record-prnews-3785665582.html?x=0&.v=1

        GM
        http://finance.yahoo.com/q/ks?s=gm
        GM’s operating margin is 4.25% roughly.

        I will say again. GM CAN’T attract private capital investment without a “breakthrough” product (which is why they are hocking the Volt SOOOOOO hard) or without reducing costs.
        The Volt will be a bust and won’t be a “market success” for years if GM has the patience to stick with it. So, cost reduction efforts are inevitable and will happen soon…….

      • 0 avatar
        eldard

        So Daimler is spending 20 billion euros in the next two years for upgrades? How much does Ford spend on R&D per year again? Less than 5 billion…in dollars.

  • avatar
    ihatetrees

    Is the 60 month car note still common? I thought there had been a shift in the car financing habits. Sure, there are always going to be those who, if they have a decent job, will finance the most car/truck/SUV possible for 60 months (and have a hard time filling the tank every week). And the dolts at Allied Bank (ex GMAC) will sell such notes…

    But my (admittedly anecdotal) knowledge of those with recent new or slightly used cars show that more $$$ are put down, less car is bought, and financing is for shorter periods…

    • 0 avatar
      Scoutdude

      Well there are still lots of 0% ~1.9% for 60 month incentives still being thrown around out there. When it’s 0 for 60 it’s pretty hard for most people to see a good reason to go for a shorter note. There are also still some places making 72 and 84 month car loans out there.

  • avatar
    eldard

    Anyone who thinks there will be a recovery for the West is deluded. All those jobs were from an illusory economy built upon thin air. They shouldn’t have existed in the first place. What we see now is the true value of the world’s wealth. And it ain’t much.

  • avatar
    Conslaw

    The car bailout was insignificant in the big picture of government spending, but it was very significant to the people, companies and communities directly affected. In the big picture, I’d say the number one factor in economic problems is a mortgage securitization market that was flawed to the core. Separating the servicing of mortgage loans from the underwriting of the loans created an industry that systematically underestimated mortgage risks while inflating home prices. At the same time, banks didn’t even protect themselves by properly executing paperwork on their mortgages. Diverging objectives between tiers of securitized mortgage interests is making it hard to do mortgage modifications that are objectively good for the borrowers the communities and even the majority of mortgage investors. Finally a completely messed up mortgage assignment system (MERS) has made it difficult to determine who really has a valid mortgage.

    Our major banks have been subsidized to the tune of hundreds of billions of dollars, and still many of them are on the verge of failure (BofA cough!).

    So many people rag on the autoworkers in this forum, but if the autoworkers, union and otherwise, built cars as poorly as the bankers set up and implemented the mortgage securitization system, the average new car wouldn’t last 1,000 miles.

    • 0 avatar
      Robert.Walter

      +1. Esp the last paragaph.

    • 0 avatar
      AJ

      Don’t forget the government polices designed to increase homeownership through government mandates about lending. That did it’s share to to make a lot of bad quality loans and inflate the real estate market as about anyone could qualify for a loan. No credit, no downpayment, no problem! I was working with Fannie back in the day (who was handing out marketing cash I might add) to promote a lot of those programs to people that had no business owning a home. I personally knew someone that got a 105% loan right out of college, took that extra cash, paid off their student loans, then two years later stuck the bank with the house after not making a mortgage payment for at least six months. Then went and bought a new car!

      Whether it’s buying a house or a car, I’m all for stricter lending. In fact instead of replacing one of my three cars as I’d typically do by now, I just bought a rental house by the old, tougher lending requirements. And the renter will not go six months without making a rent payment, that is for sure.

      • 0 avatar
        Scoutdude

        The private money portion of the lending industry was much more to blame than Fannie and Freddie. They were the ones doing the bundling and manipulating to sell worthless loans as grade A investments.

        Don’t be so sure about never having a renter go six months w/o paying rent. Depending on your states regulations it can take months to process an eviction if the renter wants to fight it. In pretty much every jurisdiction there is usually gov’t employed or partially financed personnel to help them do just that w/o costing the dead beat tenant a penny. Then you may find you’ve got quite a mess to repair when they damage the place in retaliation. So by the time everything is said and done you could be going w/o rent for longer than 6 months. I’ve been in the rental real estate game for 15+ years. Mine were all purchased back in the day when strict 20% down, proof of adequate reserves, ect was the name of the game in investment property financing. BTW having just refinanced some of my properties the standards are still not as strict as they were when I got in the game.

        Edit: That’s not to say that the renter will be in there for that 6 months but by the time the place is rented again and you factor in the legal fees you’ll be out 6 months or more rent pretty easily if the dead beat works the system for all it’s worth. Thankfully I haven’t been there in a long time. The last renter that lost his job just up and left in the middle night with only the possessions he could cram in a small U-haul truck according to the neighboor who was awakened by all the banging of loading the truck.

    • 0 avatar
      jacob_coulter

      One excuse I get so tired of is “But the bankers got a bailout, so I deserve…” whatever stupid idea comes down the pike (like Cash for Clunkers, auto union bailouts, home mortgage bailouts, solar panel bail outs, etc.)

      Two wrongs don’t make a right, I’m against bailouts for any private industry (banks included) but ALL the major banks paid ALL their TARP funds WITH interest.

      http://money.cnn.com/2009/06/09/news/companies/banks_tarp/

      You can’t say the same about the “loans” (read Union Graft) that were given to GM and Chrysler that the American taxpayer will never see again.

      Not only did GM get a taxpayer bailout, they basically get to operate tax free for at least the next decade since they took tens of billions of dollars in tax deductions for their pseudo-bankruptcy.

      http://online.wsj.com/article/SB10001424052748704462704575590642149103202.html

      Crony Capitalism at it’s finest.

      • 0 avatar
        highdesertcat

        I was against the bailouts for anyone and everyone. Failed businesses should fold and not be nationalized and a burden on society.

        But having said that, I also believe that there is a much better chance of getting all the tax payer bail out money back from banks and investment houses whose functions it is to MAKE money through investments and financial instruments, than it is to hope to get it back from defunct auto manufacturers whose function it is to SELL their products to an unwilling buyer.

        We have already gotten back a great deal of money from the financial industry that was bailed out, but we’re still waiting on the US auto industry to repay some real money. Unused bail out bucks do not count.

  • avatar
    sellfone

    Do we do polls here? This would be an interesting one to see the results of. It could go something like this:

    A) I never bought new cars. Ever.
    B) I have always bought new cars but kept them for a long time (6 to 10 years or even longer).
    C) I used to purchase a new car every 3 to 5 years (or sooner) and still do.
    D) I used to purchase a new car every 3 to 5 years (or sooner), but now have stopped that practice based on the current economic situation.

    I, myself would check option “D”, so count me in as part of the reason new car sales are lower. I actually spent the better part of a decade and a half buying (or leasing) a new car every 1 to 3 years. Those days are over for me and my two daily drivers are a ’91 and ’96, and I plan to use them till they’re dead.

    • 0 avatar
      nickeled&dimed

      A)
      I’ve only bought three cars ever.
      1- 1987 Volvo 740 Turbo, $500 @ 256K miles
      2- 2000 Subaru Legacy, $5000 @ 100K miles
      3- 2005 Toyota Prius, $8500 @ 100K miles
      Drove the Volvo over 30K miles, still driving the Subaru, the Prius is a new purchase, the wife’s car.

      I’m carrying on a family tradition – the only new car my parents ever bought was a 1981 Subaru GL, which they kept for 14 years & 150K miles

      The used car market right now is awful, though, and I may go new for the next purchase, if the used market continues to be outrageous and I can limp the Subaru until next fall.

  • avatar
    Syke

    The new reality in car buying, I believe, is people like me: People who save in advance for that new (or newer used) car, when they buy they pay cash, and immediately start re-saving against the time when that car is going to need to be replaced.

    I’m currently in the final stages of pre-buying. Once I get the savings account in the $30-35k level, I’ve got $18-20k for the purchase of a new car (and I’m really in the mood for a new one this time around – been buying only used since 2000), and I still have a good cushion against emergencies. Once the car is bought (probably winter/spring 2012) it’s time to start restocking the bank account against the inevitable next purchase.

    Happily, I love ‘B’ class cars, insist on manual transmissions, so my proposed budget leaves me some reasonably desirable alternatives (Fiesta, Mazda2, Fit, Fiat 500, and I’m seriously curious about the Sonic).

    I’ve had to laugh at the financial twistings and turnings going on over the past three years, because the above is how I’ve always bought cars, motorcycles, electronics . . . . . . well, everything but my house. And the mortgage was paid off a year and a half ago. Other than the mortgage, I can’t remember when I’ve paid interest on anything. And I intend to keep it that way. Said attitude worked for my father just fine, I can’t see why it won’t work for me. And I’m not lacking for entertainment (the garage is currently a Porsche, four motorcycles and 17 bicycles) by being too parsimonious.

  • avatar
    ronin

    Thirty years ago you financed a new car for 24 to 36 months, and put 10 to 20% down. No leasing. You got a new pickup truck because you couldn’t afford a new car (pickups were cheaper!). You got a Toyota or Datsun because they were cheaper.

    I submit that those terms may just be the norm. The soaring car prices in recent years have paralleled working couples and the social acceptance of huge debt.

    That bubble popped. Cars are now nakedly expensive, with ridiculously high finance terms.

    This may well be the new normal. Car prices will simply have to come down. Manufacturers putting cash on the hood is not an incentive- it is the true market price of the item.

    A year from now we’ll still be making excuses that as soon as operations are back from tsunami damage, all will be good.

    Three years ago the used house organization spokespeople were yapping about pent-up demand, how houses will soar again by 2010. The fake ‘pent-up’ demand call has reappeared. It may appease shareholders, but only for so long.

    • 0 avatar
      jhott997

      you are correct Ronin.
      Cars are TOO DAMN EXPENSIVE. Their manufacturer is much to capital intensive! It is an industry of the past that is at the beginning of a massive correction.

      From a consumer perspective, the credit crazed 80′s 90′s 2000′s are over. We are adjusting the new reality. It will take time and will continue to be painful. Those vested in the “old ways” will deny, scream bloody murder, claim the recovery is just around the corner but it is not. There is a long period of de-leveraging debt and adjusting life-styles to the new reality.

      Just remember: death, in life and in corporations, is part of life. Don’t be afraid to let go of the past and look to the future. This is how we grow and learn.
      This, is why I believe GM and Chrysler should have been “allowed” to liquidate. They died. All the “bankruptcy” did was delay the inevitable and, arguably, hurt Ford and Toyota in the long run.


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