Driving a clunker and need a new car, or driving a 2013 and looking for an older car that looks like new? This is the question that auto industries are going to have to start answering within the coming months. An article written by Terry Box of Dallas Morning News captures the panic that may soon ensue in the auto industry.
The success in the auto industry over past few years has been fueled by new car sales and this has, in turn, helped to greatly boost our economy. There were many people who needed to replace old beat up and run down vehicles. Many of these people were individuals who felt the hard times of the past recession and were finally able to get back to a presumably stable financial situation. The need for a new vehicle is one that doesn’t vary from person to person. It promotes livelihood, getting to and from work, doctor’s appointments, soccer practice, school, and gets you to dinner. The once high sailing success of the auto industry was driven by individuals who were in desperate need of a new vehicle coming out of the recession, and this may no longer be the case.
Many dealerships have begun to worry that their demand from so-called “need buyers” is going to shrink and the demand from “want buyers” is going to soar. This change is a drastic one. Instead of having people coming in who must leave with a vehicle before the weekend is over is a much easier sell for dealerships than people coming in who may want to purchase a vehicle in the next six months.
This change will likely slow sales dramatically and we are likely to see more incentives being offered for people to make a vehicle purchase. These incentives include longer leasing periods for lower payments and larger deductions (bigger sales) which both cause dealerships to lose money. The longer leasing periods, as well as longer loan periods, have the individuals purchasing the vehicle off the market for any potential future purchases for longer periods of time. This also leaves the dealerships in a position where they are staying above water for the near future but will be struggling to keep up later. The lengthening of these periods is likely to raise interest rates for the consumers as well.
In order to keep your footing when going vehicle hunting, try to avoid the longer loan periods to avoid higher interest rates. For more information on auto news, please check out Terry Box’s news page here.