Looking for a new car? This maybe last year’s model but it’s new and 40% off. I recall seeing such lunatic deals the last time we headed for a collapse in auto sales. Mac Haik Ford in Houston is practically giving it away. Even some of the 2017 models are getting chunky discounts.
Jim Glover Chevy near Arkansas River is also trying to shift 2016 metal. Why buy used when a 2016 new Malibu is $7,000 off?
Chrysler is also chucking discounts left, right and centre. Northwest Dodge Houston is taking $14,000 off new Rams.
“If GM piles on incentives at this rate three months in a row, it would spend nearly $4 billion on incentives, in just that quarter, just in the US alone. How much dough is that for GM? In Q1 2015, GM reported global net income of $2.0 billion. In Q1 2015, it reported global net income of $0.9 billion. These incentives can eat an automaker’s lunch in no time. And they did in the years before the industry collapsed during the Great Recession.”
The National Automotive Dealer Association (NADA), a division of JD Power wrote,
“Manufacturers dialed up incentive spending 18% last month to help reduce new vehicle inventory levels that are at a decade-plus high.”
The NADA Used Car Guide’s “seasonally adjusted used vehicle price index fell for the eighth straight month, declining 3.8% from January to 110.1. The drop was by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble. February’s index gure was also 8% below February 2016’s 119.4 result and marked the index’s lowest level since September 2010.”
WolfStreet noted “Used vehicle wholesale prices determine the value of the collateral for $1.11 trillion in auto loans that have boomed on higher prices, higher unit sales, longer maturities (the average hit a new record of 66.5 months in Q4), and higher loan-to-value ratios (negative equity)”
It doesn’t bode well.