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Wednesday, March 29, 2017

Welcome To The US Auto Market (aka The 'Trade-In Treadmill')

Most of you reading this are probably aware the U.S. auto market is a train wreck waiting to happen, but a recent report by Moody’s really puts the industry’s insane lending practices into perspective.

Reuters reports:

As U.S. auto sales have peaked, competition to finance car loans is set to intensify and drive increased credit risk for auto lenders, Moody’s Investors Service said in a report released on Monday.

“The combination of plateauing auto sales, growing negative equity from consumers and lenders’ willingness to offer flexible loan terms is a significant credit risk for lenders,” Jason Grohotolski, a senior credit officer at Moody’s and one of the report’s authors, told Reuters.

Motor vehicle sales have boomed in the years since the Great Recession. U.S. sales of new cars and trucks hit a record annual high of 17.55 million units in 2016.

Industry consultants J.D. Power and LMC Automotive on Friday reiterated their forecast for a 0.2 percent increase in sales in 2017 to 17.6 million vehicles.

But Moody’s says it expects U.S. new vehicle sales to decline slightly to 17.4 million units in 2017.

In the first nine months of 2016, around 32 percent of U.S. vehicle trade-ins carried outstanding loans larger than the worth of the cars, a record high, according to the specialized auto website Edmunds, as cited by Moody’s.

Wow.

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2 comments:

  1. Called around and most of the dealers don't want to deal. most cars start at over 20,000 and the trade in for your old car is a total joke! Looked into a base model chevy Cruze which is a re-marketed chevy caviler. Not even a great car! Want 21000 for a base model. I told them, you have got to be kidding!!!! With their so call discounts 17,500. Told them to forget it!!!

    ReplyDelete
  2. Trucks now dam near what i paid for my house before the bubble

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