Unless you have been under a rock for the last year, you know that there’s an ongoing credit crunch, which in turn has caused the stock market to plummet like the neckline on a Grammy-evening dress. Here are some interesting concepts in terms of how credit affects the world of cars.
1) Dealers cannot get credit to buy cars: This applies to both new and used car dealers. Fewer new car dealers mean less sales by manufacturers. Usually sales are reported as deliveries to dealers. If new and used car dealers cannot get lines of credit, they have to pay cash for the cars they floor. With the exception of the long-running dealers, most use credit to floor cars.
2) Manufacturers have less cash with which to work: When the stock plummets and there’s no available credit, companies like Ford and GM have less money for R+D, operations and changing production to more profitable products.
3) Less money for advertising: This means fewer sponsorship dollars for racing, which translates to a scary future for every series from SCCA and Grand Am to American Le Mans and NASCAR.
4)Higher prices for cars: Even though the Fed just announced no change for the interest rate, the rate is still low enough to devalue the dollar. Since most automotive components come from other markets (China, Germany etc…), it costs more to build cars. That cost must be passed on to consumers.
5) Say goodbye to halos: No money…no supercars that make no money for the corporations. Even the Viper is in peril!
6) It’s buying time: If you have cash, it’s time to start looking for your dream car — be it classic or new. In times like this, it’s a buying opportunity for those who are savvy. It might seem heartless to take advantage of other’s misfortunes, but isn’t that the American way?
No matter how one looks at it or what the Presidential/VP candidates might claim, the near-term economy looks really grim, especially for fans of automobiles…but again, if you have stockpiles of cash, it won’t be all too bad!