Most auto industry analysts knew that higher interest rates for new cars was coming, in fact, most consumers in the new car market probably considered it too. The fallout from subprime mortgages has hit the US auto industry, and auto loan rates just went up. You are worried? Well if you are in the auto industry or even the after market auto industry then you know this is really serious for your business or livelihood.
If you have a high credit score and golden credit, it may not be that bad, but the truth is that most American consumers have some blemishes on their credit reports, either from themselves or from a criminal event of Identity Theft. If your credit is not perfect and you think you will get a good interest rate or a good deal on a loan, think again.
In fact, for people who do not have a lot of credit, it may be difficult to obtain a loan. What does this mean for car dealers? Well, an industry analyst stated that the estimated sales for 2007 should have been 16.5 million cars sold, but now most are revising it to 15.9 to 16.1 million cars. That’s a big difference from 400,000 to 600,000 fewer cars. It means layoffs, factory slowdowns, and lower profits. It will hurt the industry. Automotive News magazine stated:
“NADA’s chief economist, Paul Taylor, predicted that US sales of new cars and light trucks this year would be roughly equal to the 2006 mark of 16.5 million. Now Taylor predicts that 2007 sales could fall as low as 16.5 million. 1 million units. At the same time, some lenders have raised interest rates on auto loans to subprime buyers. Dealers in markets where subprime mortgage problems are most acute report sales in their stores are collapsing. “
US automakers will be hit the hardest as they are struggling to regain market share from the Toyota and Honda brands, and the worst part is that the first Chinese cars hit the first Chinese car dealer in the US. ., In New Jersey, mid-2008. The question is how much more shocks these companies can take and what will this affect consumer confidence as we dive into the next downtrend in the US business cycle. .
Why did all this happen? Well, when automakers want to sell more cars and when there is a large amount of retained earnings or it is easy to raise “large amounts” of capital, this combination can cause a bubble. As long as things are okay, no one says anything until things are no longer okay; then a quick adjustment must occur to prevent bubbles from bursting, sometimes it is handled correctly and other times it is too late. Consider all this and think about it, because history always repeats itself.
Think about this, we are. Sincerely, Lance.