This is an automobile centered posting. Selling cars, trucks, and utility trailers put a roof over our heads and food on the table for many years. Although retired, I keep up with the trends and with friends still in the business.
.jpg)
REPOSESSIONS
https://www.youtube.com/watch?v=gPfnkhLvjn4&ab_channel=CarQuestionsAnswered
Circa 2003 the average repossession loss, to the lender, was estimated to be $4,000. The number one cause was a major repair. The owner couldn’t afford both the repair and the monthly payment. Since they couldn’t use the vehicle, they let it go to repossession. The lender was on the hook for the repairs or selling for a huge loss.
During the time I worked for Steve Lance’s Cowboy Corral Kia, his operation was the first in the country to sell 1,000 Kias, earning him a $1,000,000 bonus.
Kia’s 5year/60,000 bumper to bumper warranty was the key to getting people with marginal credit financed. The lenders knew should they need to repossess the vehicle; repairs would likely be covered by Kia. Further, the borrower wouldn’t be faced with the repair or payment decision. We found financing for many people who would never have qualified for used car financing.
Fix and Keep
Another YouTube channel I watch. Here, Car Wizard explains the merits of keeping and maintaining an older (and paid for) car.
https://www.youtube.com/watch?v=eXYKGcutI6A&ab_channel=CarWizard
This channel is worth watching as he lays it on the line. His rants about cheap plastic parts are epic. For example, $4,000 in labor to replace a $50 part. He then takes apart the $50 part and shows the cheap plastic gears that failed.
He often explains what vehicles he recommends buying and those he won’t recommend, including some Toyota models.
Damn Fools
I’ve mentioned several times that, in my mortgage collection job, the number of expensive vehicles and toys I see at the homes of people who are behind on their mortgage may explain why they are behind.
One stands out as a “shining” example. A $700,000 house with a three car garage has parked, outside, a King Ranch Ford pickup, a Lincoln Navigator, and a late model Audi A4. An unanswered question is, “What is inside the garages”.
This one sticks in my memory as one of the nastier couple I’ve encountered. In general, the more expensive the house, the bigger the chance of encountering an asshole.
“How dare you question me?” demands Mr/Ms Entitled.
Bore and Stroke
The amount of information on “how to buy a car” amuses me. From decades of selling them, usually the decision is, “How much to drive it away (bore) and how much a month to keep driving it (stroke)”.
Up in the tower, the managers are not plotting on how to shaft you. Rather, they are trying to structure a deal some lender will approve. Unless you are paying cash you are not the primary buyer.
But, but WSF, I have my own financing! Wonderful, I’m still looking at the deal because your “own financer” will use the same criteria as any lender to approve the loan when you present them with the final numbers.
What collapsed the car biz circa 2005-06 was financing. For whatever reason, lenders outside captive lenders (Ford Motor Credit, GMAC, etc.) quit financing even people with great credit and decent down payments. Will history repeat?
Stellantis
A European conglomerate that acquired Chrysler has done little to improve the quality, IMO, of any brand under their ownership. Their website. MORE
Of the ten slowest selling new vehicle models in this country, six are from Stellantis with the worse, Jeep Compass, with a 710+ days in inventory. The Compass, under the body, is a Fiat.
There isn’t a single Stellantis vehicle with a decent Consumer Reports rating.
So who will buy their cars? If the price is right, rental car companies.
Floor Plans
New car dealers receive inventory at no initial cost, in general. Every 30 days, they pay the manufacturer 10% of the invoice (curtailment). Usually, after 90-120 days, the entire amount becomes due. In the biz this is referred to as, “having a birthday”. From experience I can say great effort, and incentives to the sales force, is made to sell older inventory. Aging inventory eats up the dealer’s credit lines. Given the slow sales of many models, I foresee a lot of dealers going out of business.
Buy Here, Pay Here
.jpg)
The reality of this business is a very expensive way to rent a vehicle. For people with horrible credit, but can come up with a down payment and full coverage insurance, it is a way to have transportation.
One Trillion Dollars
A collapse of the automobile industry isn’t enough, by itself, to collapse the overall economy. It would have serious repercussions.
As always, YMMV
15 comments:
Great info WSF. Thanks. Much better than talking to a loan officer at a bank or credit union. They too are trying to make a sale.
We're at the edge of the precipice, and the lemmings are pushing.
A buddy who worked for a couple of the buy here, pay here places, told me their unofficial motto was "fifty dollars down and fifty dollars a week for the rest of your life."
But that has been several decades ago and presumably the tariff is higher nowadays.
W.W.W
...and the lemmings are pushing.
like that.
EdC
The two biggest profit centers in most dealerships are the finance office and the parts department. There will always be the 4 C's of credit. Credit History, Capacity, Collateral and Character.
Selling cars has always been considered by many to be "Risky Business". Consumers constantly feel ripped-off and taken advantage of, even by honest dealers. And yes, there are plenty of up-front and honest dealers. The Chevy dealer here was quite pleasant to deal with, as was the Jeep dealer I bought my Grand Cherokee in 2005. I might be a bit "advantaged" from your typical consumer as I had many friends in the business, and got to see how things worked from the inside. Through my dealership friends I met some of the "Repo Experts" in the area, and some of their stories were hilarious. And a few were more serious.
"Cheap Plastic Gears"....like the nylon teeth on an old Pontiac V8 camshaft gear?
DrJim
Nylon gears....grrrr! Very high failure rate along with fuseable links.
I've probably sold over 3,000 vehicles. I can say I never lied to a customer to make a sale. By omission? Yep! I'm not their parent. If they don't ask, I don't tell.
Steve Lance's orders to me where, do it right, do it legal, don't cut corners.
My advice to anyone buying a car? DO YOUR DAMN HOMEWORK! I appreciated informed customers. The sales went quick, they understood the offer we made, and the dreaded Customer Satisfaction Survey days later usually was positive.
Thanks for the updates and the links!
Old NFO
You are welcome. Hope you found some useful.
There's an awful lot going on in this post, not least debt.
My rule is this, if you can't afford it, don't buy it. And, cash on the nail.
Of course they're trying to ban cash, especially in Europe.
LSP
Wise words. The last vehicle I financed was in 1984.
Okay, let me take a "bizarro world" position-
A year ago I bought an RV. I probably paid too much for the damned thing because of personal conditions, but...
I foresaw inflationary conditions in the future. Maybe even HYPERinfationary conditions, and figured the dollars I was borrowing would be paid back with dollars that were worth less.
Maybe even WORTHLESS.
I heard a report that the inflation rate in Turkey is now 80%+. I have no idea if that will happen here, but the dollars coming out of my wallet to pay for this RV are already MUCH less valuable that the ones I borrowed... and I don't think that trend will cease anytime soon.
Rich people talk about using "OPM'S".
I have basic stuff stored safely away. I like the idea of buying stuff with other people's money.
GB
Extreme position. You can live in that RV in a worse case situation.
Happy Independence Day!
It was a good day.
You laid it all out so well. I bought my Truck during height of Pandemic, ridiculously Buyer Friendly Terms when there's Blood in the Streets and they threw in loads of Freebies. I'd rather have a Paid Off Vehicle tho' of coarse, but the cost of even gently used Vehicles that were just driven by the Dealership is prohibitive, who has that kind of Cash to outlay? I ran the Collections, Foreclosure, Bankruptcy Depts. for major Financial Institutions in my first Corporate Life for many Moons before Retiring from that Industry that pretty much went Tits too... Banking no longer being a Secure Career choice and nothing is too big to Fail in spite of the Govt. saying so. A Collapse is indeed on the Horizon... in so many ways that are unprecedented.
Post a Comment