Zero Percent Financing Is Back

[Joubert[$]]

Ford was trying to hold the line with 0.9% for up to 60 months on strong credit, but GM and DCX dropped the hammer on zero percent earlier this week.

Can you say bloodbath?

These guys are all gunning for market share at the cost of future profits. I'm pretty heavy with Ford stock now, and I am one unhappy camper. They're not only putting out zero percent, but giving cash back of $1000 to $3000.

Awful, awful, stupid move. Like any classic oligopoly (think the airlines), the Big Three are trapped in a spiral of matching the other guy's offer. Yes, they sold almost 17 million new cars last year -- the second best volume ever -- but the off-lease and used glut is going to hit hard this fall.

BTW, this is all in reaction to June sales sliding almost 2% year-over-year. Don't let anyone tell you differently. The numbers started sliding, the automkers want 17% and you're going to see a glut of used vehicles soon because many of the used, high-end buyers are coming out of the used market and scooping up a new since the depreciation impact is lessened.

Dumb, dumb, dumb! I hate industries that march in lock-step.

[conradd]

With sympathies to the stockholders, I agree that it's a wonderful time to be a used car buyer. I prefer to buy used and instead of buying last year, I've been putting what would have been my car payments into savings. This year, I should be able to pay cash for a better car than the same $$$ would have purchased last year.

Industry-wide, it's a death spiral and they're going to have to suck it up and sacrifice some short term sales if they want to stay viable. This is a huge chunk of our economy and I'm concerned.

Deb

[brian_igo]

Yeah, they are trapped in this financing spiral because they've let their product lines go to hell. The car lines have rotted while they put all of their R&D budget into SUV's. And that is really bad news because the SUV craze has about run its course.

Last week Ford pulled the plug on the Lincoln Blackwood, its $50K ultra luxury pickup. This was a vehicle that had been in development for more than three years (on an existing platform!) and it didn't last twelve months on the market. That, my friends, is landing with a very loud thud.

SUV sales haven't followed suit, but the double digit gains seen for nearly a decade are gone. The only size class generating market excitement in the SUV segment are the subcompacts like the Ford Escape, Honda CRV and Toyota RAV4, which have much lower profit margins.

The leading edge of the market has moved from SUV's to new-generation Eurosedans led by the VW Passat. The Audi A6 and Nissan Altima and Infiniti I35 have fortified that category. but no one in Detroit has a player for that market or even one in the pipeline.

If, say, Honda's next Accord connects this style with a car the mass market embraces, like the Explorer did with the SUV fifteen years ago, it will start the kind of beating Detroit hasn't seen since the early eighties.


Brian