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| State of the Showroom! | | Date Created: Oct 08, 2008, 08:59 PM |
A rare editorial.
It has been a bizzare few weeks in the vehicle business. There are so many changes that no one ever saw coming, that the entire business is different. So different that many people have just plain gotten out of it. The staff at nearly every dealership is completely different than just six months ago.
It is a whole new job, and a whole new climate.
Financing
As far as I can tell, right now financing has changed very little for the vast majority of us. If your credit score is solid (675 or higher) the only change I can see is that you may be asked for a down payment to get that 0% or 1.9% you see advertized. Not a huge down payment, but 5% or 10%. That is a maybe. I have seen plenty of zero down deals go through for those 780 and above crowd,
This was the norm 20 years ago, before the finance comanies started getting the shovels out and digging the holes they find themselves in.
The opposite is true for the sub-prime car loans. Down payments have gone up, as have interest rates. These people seem to be the hardest hit. Interest rates have moved up, but only slightly. Approval has begun to tighten up. If it is not a "logical" car, and a reasonable price. It is much less likely to happen. As I type this we are preparing to launch a new sub-prime program we have negotiated with a couple of banks that will bring us back to where we were 6 or 8 months ago. A bonus for us because of the size of the Suburban Collection.
Leasing
It's over folks. The unreal and incredibly low lease prices of the last few years are over. They will not come back. This was a failed policy that should have disappeared a while ago, and it brought the big three into a cycle of losses and bigger losses to maintain market share.
Is there leasing?
Yes. No question. However, it is a different animal.
? Leases are longer, however term is actually more flexible.
? Approval is harder if you have less than perfect credit, however there are "tiers" that mean more people theoretically can get into a lease.
? Payments are higher, and since they are heavily based on the programs a manufacturer is offering, they tend to bounce up and down. What is a great price for customer "A" may be a much more expensive car for customer "B."
? Not all cars have a program.
? There will not be pull-ahead programs in the future. Buy the correct amount of miles!
Overall, I went from 40-50% leasing (way below average for a salesperson in Michigan) to 30-40% leasing. Vehicles that are being closed out (remaining 2008 models) tend to be the best prices on a lease right now.
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Is there good news?
Yes! This is a buyer's market. Some of the programs that are running are fantastic. It's not available to everyone, but if your timing is right (lease is ending, or you need a new car), and your credit is good - this market is amazing. I can't believe some of the payments I see on car purchases today.
SUV's are even a step better. Huge discounts to keep the factories open and American's working. 2008 closeouts too. Just think for a minute; The banks don't want the dealer debt either. That means that the banks (like GMAC) who finance dealer inventory and pushing companies (like GM) to move the older inventory.
I sold a 27,000 car (not SUV - sedan) that gets good gas mileage (29mpg) today. The customer qualified for $9,500 in rebates. 35% OFF. This is a good selling model with no 2009 versions available yet. Incredible!
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