8-year auto loans
We are looking at long term loans of up to 8 years for new cars. Generally, the Finance Department of an Auto Dealership makes as much money as the Sales Department. After the 0/0 deals have come and gone, the new car sales markets are looking for ways to keep up with the high sales. By offering lower payments of $ 50-100.00 per month less, car buyers who couldn’t afford the car they wanted will now be able to fit it into their budgets, as many Americans are underemployed – in other words, they work at Home Depot despite that you have two advanced degrees.
Telecommunications job that they may have had at $ 60-88K per year has turned into a cash shortage job of $ 36K per year. These consumers remain the target of dealerships even with these current problems. The real problem comes down the road similar to those who damaged the leases where people were upside down in their values by the time most turn around in their cars; the average is three years.
GE Capital dropped out of the sport utility vehicle and car leasing game, and GMAC and FMC lost millions on bad lease deals when the cars were traded in, they couldn’t be sold for the agreed-upon residual values. Many times, trades before the end of the term or open leases meant that the consumer would have to bury those numbers backwards in financing their new car. So they could have traded in a Jaguar or Cadillac and passed on the difference and then have payments of $ 400.00 per month on a Nissan Sentra or Ford “Fajita”, I mean “Festiva” Turbo, of course, with all the options. This was a great game in the leasing days of the early 90’s.
With 8-year loans, your payments will be lower, but that three-year hunger to buy a new car won’t be fulfilled without taking a big hit. Of course, this would be bad for future car sales. Or a decent workaround for now to sell more cars, but it would mean the economy would have to be pretty wonderful in 8 years. Unfortunately, if people keep their cars longer, auto parts stores will do better in 3-5 years, due to scheduled obsolescence of vehicles, which is made in the car in the first place. Some industries like car wash, which tracks new car markets for about 3-4 years, as people with newer cars tend to spend more money on washing, will be affected after that period of time. Who wins? If this great 8-year loan game sells a lot of cars in the third quarter of 2003 and during the 2004 rising cycle election year, it will go a long way after you market auto accessories as people add their car. People have an emotional bond with their cars, and just like men buy Viagra and women get breast augmentation or enhancement, this very impulse from themselves is what prompts them to upgrade or customize their cars with new features as well. As you move forward to build on this extension of your personalities, our great American love for the Automobile. Speaking of “Apple Pie”, these are real trends. Anyway, if auto parts go up and car wash goes down, at least there will be more cars on the road, so the expanded pie will take care of the declines. Occasionally there are events that trigger a large rotation of the sector or trigger small changes in the subsector, which move the markets. Eight-year auto loans is a strategy, which has been used before with auto leases, but there is a long-term issue that you need to worry about in this tactic for short-term profit.