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WHY YOU WILL PAY MORE FOR YOUR NEXT CAR TRUCK OR SUV (IF YOU
WAIT) (WHAT YOU DON?T KNOW COULD
a. Auto companies are decreasing inventories. Auto companies once dominated by out producing their competition. This strategy failed in a big way and they have learned their lesson, production that meets demand is the responsible strategy. No more big rebates to move excess inventory.
b. They are under pressure to show a profit, the boards are looking for higher stock prices. The major auto companies have announced their intention to decrease supply to meet demand.
Huge pent up demand.
a. The pre 2008 sales rate for autos in the
b. The rate of sales since 2008 has been 9.2 million to 11.4 million sales per year resulting in a pent up demand of 9 to 15 million units. These units will be sold when the economy turns around causing even more demand on a reduced inventory of vehicles. More demand on lower inventory means higher prices.
Source: The Wall Street Journal
Historic low interest rates won?t last.
a. Once again supply and demand will play a role. Today?s rates are the lowest in decades, when the qualified buyers begin to enter the market in numbers; the rates will again begin to rise.
Banks are recovering from the mortgage meltdown, when their balance sheets return to normal they will again be looking for qualified borrowers to again make a profit. Profit means rising rates. Bankrate: Avg. Car Loan Rate of 6.21% Lowest in Decades
Interest rates on auto loans are hitting record lows, a boon to car buyers and a benefit to the nation's recovering auto industry. The interest rate on a four-year loan for a new car averaged 6.21% in the latest weekly survey of major banks and thrifts, according to Bankrate.com. That's the lowest average rate in more than two decades of tracking. "What's really driving our market right now are these low interest rates," says Pete Greiner of Greiner Ford Lincoln in
Net income falls on higher interest expense
Revenue gains in all areas of the business helped drive up third quarter operating profit for AutoNation Inc., but net income dropped, primarily on higher interest expense
Investments in technology, safety and economy are driving up cost and price.
a. Customer focused technology such as navigation, blind zone alert, back up camera, and power lift gate all add cost to future products.
b. The cost of increased fuel economy and safety is mandated and every year auto makers are forced to raise prices to support these improvements.
c. A recent example of the cost of new technology is the electric Chevrolet volt. This car will cost 1.6 times what an equivalent non electric car will cost. Gm forecasts it will loose money on this vehicle for the first 2 years of production even at the higher price.
Electric cars will need two years of government support in developed markets before they can take off on their own, Renault Chief Executive Carlos Ghosn said on Tuesday
Monetary pressures will drive up the cost of all automobiles new and used.
a. Inflation is probably the largest factor in the rising cost of autos. When the economy begins to turn, the supply will once again be outpaced by demand. Every supplier will need to raise prices to keep up with their rising cost. Does anyone remember what happened during the Carter era? Interest rates were at 21% and gas lines around the corner because production did not keep pace with demand. Many Wall Street advisors are recommending investments that are inflation proof. What do they know that we don?t know?
b. Another monetary pressure is the valuation of the dollar versus other currency. Lower dollar means imports are more expensive, lower dollar means
FOR ADDITIONAL CONTEXT, here are a couple more things to consider. First, we are in the midst of the strongest bull market since World War II. Yes, that does seem hard to believe, but here?s the fact. Since the credit-crisis low reached on
PARTS SHORTAGES SHUT CHRYSLER
This week Chrysler Group expects to idle its
And Ford Motor Co. expects to reopen a suburban
On Friday, Ford also closed its Kentucky Truck plant because of a parts shortage. That factory builds the F-series Super Duty pickups, Ford Expedition and Lincoln Navigator. As of late Friday the shutdown had not been scheduled to extend into this week, a spokesman said. .
Ford also took an additional week of downtime at its
Many suppliers who cut capacity to the bone during the downturn either can't ramp up quickly enough or are gun-shy about adding equipment and workers amid the fragile recovery, industry observers say.
"I see tremendous capacity constraints throughout all tiers of the supply chain," said Sharkey, the
Tier 1 suppliers have had an easier time adjusting to the rebound in demand, said Bill Kozyra,