The Truth About Cars » easy credit http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sun, 14 Sep 2014 15:36:15 +0000 en-US hourly 1 http://wordpress.org/?v=3.9.2 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » easy credit http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com Bubble Warnings Loom Large Over US Auto Sales Boom http://www.thetruthaboutcars.com/2014/08/bubble-warnings-loom-large-us-auto-sales-boom/ http://www.thetruthaboutcars.com/2014/08/bubble-warnings-loom-large-us-auto-sales-boom/#comments Tue, 05 Aug 2014 11:00:38 +0000 http://www.thetruthaboutcars.com/?p=882066 Business is booming on the lot, with the industry on pace to move some 16 million vehicles out onto the highway by the end of 2014. However, some Wall Street insiders are growing bearish with this bull market, blaming easy credit for the surge in demand. Reuters reports the insiders believe the demand is artificial, […]

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Salesman With Customer

Business is booming on the lot, with the industry on pace to move some 16 million vehicles out onto the highway by the end of 2014. However, some Wall Street insiders are growing bearish with this bull market, blaming easy credit for the surge in demand.

Reuters reports the insiders believe the demand is artificial, and should begin to drop once the U.S. Federal Reserve raises interest rates next year. Morgan Stanley auto analyst Adam Jonas is among those insiders, and has gone as far as to proclaim the demand “peak auto”:

We have little doubt that we’re in bubble territory. We’ve blown through prior (sales) peaks in terms of value, the amount of money people are spending on automobiles. We’re in uncharted territory right now.

Jonas posits demand will actually hit its peak in 2017, when a record 18 million units are expected to leave the showroom floor, before dropping to just 14 million in 2019.

Easy credit is claimed to be fueling the current demand, which, in turn, is also fueling record transaction prices, the current average being more than $30,000 per vehicle. The U.S. Office of the Comptroller of the Currency goes as far as to claim in a June report that “signs of risk in auto lending are beginning to emerge” as automakers and their financing partners go after subprime consumers with ever-lengthening long-term loans.

However, most industry insiders believe pent-up customer demand is driving the ongoing sales boom, with incentives remaining stable compared to the run-up to the Great Recession six years ago. Inventories, too, are at “a healthy and manageable level,” with production capacity at near-peak, according to Ernst & Young lead analyst Anil Valsan. He expects sales to cool off and plateau in the coming years, rather than the bust Jones is forecasting.

That said, some vehicles are being moved with a much larger carrot than others, like the Cadillac ELR’s $20,000 discount and Chevrolet’s and Ford’s $10,000 discounts on their respective full-size pickup offerings. Jonas believes it’s only a matter of time before the market visits the ER for credit poisoning, warning the next decade in the auto industry will be “more brutal” than the current decade “in almost every way.”

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Tax Refunds, Easy Credit Boost Used Car Prices http://www.thetruthaboutcars.com/2014/03/tax-refunds-easy-credit-boost-used-car-prices/ http://www.thetruthaboutcars.com/2014/03/tax-refunds-easy-credit-boost-used-car-prices/#comments Mon, 10 Mar 2014 13:42:53 +0000 http://www.thetruthaboutcars.com/?p=768770 A combination of income tax refunds issued in January and February with accessible financing have boosted used-car prices overall in the first two months of 2014. Automotive News reports prices rose 1.1 percent year to date, and 0.8 percent over the past month, according to the Manheim Used Vehicle Value Index. Meanwhile, the IRS processed […]

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A combination of income tax refunds issued in January and February with accessible financing have boosted used-car prices overall in the first two months of 2014.

Automotive News reports prices rose 1.1 percent year to date, and 0.8 percent over the past month, according to the Manheim Used Vehicle Value Index. Meanwhile, the IRS processed 40.4 million returns in the first two months of the year, refunding $125.8 billion to taxpayers at an average of $3,112, which helped in propping up wholesale used vehicle prices.

Easy credit with attractive terms also aided used-vehicle pricing, making the market “more profitable than the underlying unit sale numbers would suggest” according to Manheim.

Overall sales fell 1 percent from the previous year, and 12 percent from January to 2.05 million units, with used compact cars falling the hardest at 3 percent from last year due to heavy supply and competition from newer vehicles. Used truck sales rose 8 percent in the same period due to high demand and low inventories.

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Off-Lease Boom Means Major Conflict For All Automakers http://www.thetruthaboutcars.com/2013/12/off-lease-boom-means-major-conflict-for-all-automakers/ http://www.thetruthaboutcars.com/2013/12/off-lease-boom-means-major-conflict-for-all-automakers/#comments Tue, 03 Dec 2013 15:57:13 +0000 http://www.thetruthaboutcars.com/?p=669514 The Great Recession has given us so much since it began five years ago with the fall of Lehman Brothers and Washington Mutual, from underwater mortgages and high unemployment, to bailouts of the financial and automotive manufacturing sectors and credit freezes. Regarding the last item, a byproduct from said freeze will flood automakers with the […]

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2013 Hyundai Elantra GT Exterior
The Great Recession has given us so much since it began five years ago with the fall of Lehman Brothers and Washington Mutual, from underwater mortgages and high unemployment, to bailouts of the financial and automotive manufacturing sectors and credit freezes.

Regarding the last item, a byproduct from said freeze will flood automakers with the potential to retain and steal customers when more and more leases draw to completion in the next year.

Leasing has come back into vogue as of late due to low interest rates, easy credit terms and improved residuals, allowing automakers to keep more of their profits while giving the lessee lower payments. In turn, 23 percent of new-car registrations through September 2013 are through leases, a number that should rise as wave upon wave of lease customers return to the showroom for the latest and greatest.

This fact is not lost on any of the automakers wanting to bag and tag as many customers from the booming off-lease salmon run as possible. Case in point: GM, who rolled out their lease-conquest program nationwide last month, offering $500 through January 2, 2014 to non-GM customers to lease most of the Chevrolet and all of the GMC lineup. Meanwhile, Hyundai will offer more early-termination deals so that their customer base never even make it to the run.

And how long will this run last? ALG Inc. president Larry Dominque says automakers should have plenty of fish to catch until 2017, with those whose customers are loyal will focus on retaining their stocks while those who ready to fill their coolers will be aggressive with their bait, such as lower payments and nicer incentives.

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