Posted on 06/11/2017 10:11:26 AM PDT by Lorianne
Almost every negative thing happening in the car business in particular, ludicrous technical complexity for the sake of electronic gimmickry and also to cope with diminishing returns federal safety and emissions mandates could be gotten under control by the simple expedient of cutting off the monopoly money/debt-financing that makes it all possible.
The seven year loan.
Free money (zero or very low interest).
Give-away leases.
The car industry is riding a bubble thats proportionately as large as the housing bubble of a decade ago. And it is going to pop. For the same reason that a wave has to crest and wash ashore, once set in motion.
Signs of trouble abound. They build them but no one comes. Not without inducements that amount to give-aways.
For several years now the car manufacturers have been resorting to truly desperate measures to prop up new car sales in air quotes because its a dubious proposition to describe as a sale a transaction that involves exchanging the item for a sum insufficient to cover the cost of its manufacture, plus a profit sufficient to make the exercise worthwhile.
Yet that is exactly what is going on.
As new car prices rise, the cash back offers, dodgy leases and other incentives necessary to move them off the lot also rise in frequency and inanity. Examples include the leasing of electric cars for less than the cost of a monthly cell phone contract (Fiat made just such an offer; see here) and below invoice transactions that rely on the manufacturer (e.g., Ford) paying a dealer to sell a car (e.g., manufacturer to dealer incentives) for the sake of getting rid of it, getting it off the books.
Or rather, onto someone elses books.
Give-away leases.
The car industry is riding a bubble thats proportionately as large as the housing bubble of a decade ago. And it is going to pop. For the same reason that a wave has to crest and wash ashore, once set in motion.
Signs of trouble abound. They build them but no one comes. Not without inducements that amount to give-aways.
For several years now the car manufacturers have been resorting to truly desperate measures to prop up new car sales in air quotes because its a dubious proposition to describe as a sale a transaction that involves exchanging the item for a sum insufficient to cover the cost of its manufacture, plus a profit sufficient to make the exercise worthwhile.
Yet that is exactly what is going on.
As new car prices rise, the cash back offers, dodgy leases and other incentives necessary to move them off the lot also rise in frequency and inanity. Examples include the leasing of electric cars for less than the cost of a monthly cell phone contract (Fiat made just such an offer; see here) and below invoice transactions that rely on the manufacturer (e.g., Ford) paying a dealer to sell a car (e.g., manufacturer to dealer incentives) for the sake of getting rid of it, getting it off the books.
Or rather, onto someone elses books.
Once the papers are signed and the car is driven away, it is no longer the dealers problem. He no longer has to worry about it. If the buyer fails to make the payments, it is now the lenders problem.
And that problem is written off, in its turn, when it becomes necessary to do so. The bank makes up the loss via interest and fees on other debt. Or by re-selling the repod vehicle at exorbitant interest to another debtor.
Rinse, repeat.
The dealer, meanwhile, has made a sale and it is so recorded and reported, adding another log to the swaying Jenga tower.
Sound familiar?
But wait theres more!
As the ever-more-desperate measures to prop up new car sales become ever-more-desperate and more and more people who really cant afford new cars buy them anyway, it depresses the used car market. Why buy a used car, after all, when you can buy a brand-new one for about the same monthly payment?
The used car market is cratering and that is a sure sign the fat lady is clearing her throat.
Remember: Interest rates on new cars are lower (even nonexistent) and the loan/debt can be extended over a preposterously long period seven years is now routine while the loan/debt on the used car must be of shorter duration because of the greater and faster depreciation on the used car. The typical three-year-old car is worth about 75 percent of what it was worth when new and will only be worth about 50 percent after another three years. Writing a loan/debt on an asset that will almost certainly be worth less than the balance due on the loan before the loan can be paid off is what you call a bad deal.
The loan/debt limit has probably already been reached. Seven years is a kind of Event Horizon for car loans because after seven years, almost every car regardless of make or model or what it sold for when it was new will be worth less than 50 percent of what it sold for when it was new. They cant keep pushing off the paid-for date in order to keep sales from wilting, permanently.
This is why the bums rush to ride-sharing; to the rent-by-the-hour (via an app) business model that GM (Maven) and Ford (the firing of Mark Fields) and pretty much the entire car industry have embraced as their only possible savior. The people running major companies are many things but idiots they are not some superficial evidence to the contrary notwithstanding.
Poltroons and greedheads, certainly. But not dummies.
They know that they cant keep pushing out loans indefinitely to sell cars. It is not tenable, both because of the debt load (unsupportable) and depreciation, which imposes a physical limit on loan duration. Hence the new rent-by-the-app (and hour) business model. It is the only way the business can continue without going out of business.
Either that or economic sanity returns.
The government stops mandating diminishing returns emissions rigmarole, for instance. And heres a real whopper of an idea: We get scientists, not politicians and regulators to prove that harm (real harm, not some ugsome bureaucrats hypothetical) would result from dialing back the current rigmarole to, say, model year 2000 standards.
Consider: Were new cars dirty in 2000? Were the skies suffused with smog? People choking and coughing, falling comatose into gutters? No, to all of the above. The fact is the cars and the air have been clean for decades but the EPA continues to pretend otherwise, to maintain the fiction of the need for its continued existence.
Same for the presence or absence of back-up cameras and anti-whiplash head rests and whether the car can do an egg-beater roll without its roof crushing. The fact that some people want to be parented doesnt mean the government has the right to parent the rest of us. Let those who want and need adult diapers go ahead and wear them, if they like.
So, the good news out of all this bad news is that it must soon come to an end. The cost-no-objecting and mandating; the noxious, suffocating parenting.
It is going to end because it cannot continue.
You don’t know what you are talking about.
The Geniuses at DOT.
Really?
How much do you think it costs to rebuild a freakin pickup?
Stop digging.
Yes, really.
You have shifted from vintage restoration to truck rebuild ...
Ummm. Health care and retirement for the UNION employee’s is what you are paying for.
Yep, reliable. My 2001 Frontier is still going strong, never any problems with it in 17 years. Bought it new, and strangers have been asking if I want to sell it. It has a supercharger, leather interior, nice entertainment setup, and I paid $24G new for it. Lately I've been wondering whether to buy a new truck, just to get some of the newer features. But my old truck does what it's meant to do, hauling stuff as needed.
2001 XE King Cab V6 Auto Desert Runner $17,049.00
>>You dont know what you are talking about.<<
I see a “brand new” 67 Chevy C10 long box, and a “brand new” 77 Bronco....perfect condition. Right here in East Overshoe Maine.
Want some prices?
Here’s a:
“1970 Chevy short bed black paint 350 small-block turbo 350 trans, nice rust free South Carolina, lowered with 18 & 20 inch wheels asking $22.500”
How about a:
“1986 Chevrolet 2wd long box red & white exterior red interior was originally 305 automatic, now has a 454 big block, loaded Virginia truck asking $7995.”
These vehicles are perfect.
“Want some prices?”
Now you’ve gone from doing a vintage restoration to buying a used truck.
Good for you. My 2001 SC 4-door King Cab, V6 with Super Charger, has leather seats and interior including steering wheel, 6-CD stereo entertainment system, step-up rails, roof rails, 17-inch mags, a bed-liner, tonneau cover, and towing setup. The SC models were top-of-the-line, a big step up from SE's and XE's.
Wouldn’t you know!? I thought it was BMW who had some great reason, but I’m not bright enough (pun intended) to figure it out. Now it can be told.
Well, I think 60s and 70s pickups are vintage. Anything up to the mid-90s is a sensible vehicle, then everything went to hell (computers).
Restoration?
Who wants to drive a stock 46 Chevy anything? You find the OEM body sitting in the trees and put it on a modern chassis.
Rack and pinion, disc brakes, reasonable fuel injection and electronic ignition, maybe a 5sd....Utilize the best mechanicals, and delete the computer garbage.
You: Restoration?
You: For less than half the cost of one, you could have the vintage vehicle of your choice restored and upgraded with modern brakes, suspension and drivetrain.
“Anything up to the mid-90s is a sensible vehicle, then everything went to hell (computers).”
LOL. My computer does continuous tuning with variable intake and exhaust cam adjustments.
I can switch driving modes so my wife doesn’t get quite as upset when she is the passenger.
My computer includes anti-slip and other algorithms to keep it stable on the road.
Anti-lock brakes ...
Variable octane fuel adjustments ...
(and the styling is based on a "vintage" vehicle)
“You don’t need a 5 computers to turn your radio up and down, flash your turn signals, regulate alternator output, check your tire pressure, operate the heater/AC, regulate your braking, and shift the transmission. How much does that Mustang wannabe cost?”
I paid $36k new in 2016. And it will blow the doors off most of the old ‘super-cars’ in the quarter-mile and cornering is in a different league.
ANY vintage vehicle is "used".
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