9 votes

Fear of an impending used car price collapse grips auto industry

2 comments

  1. [2]
    skybrian
    Link
    From the article: [...] [...]

    From the article:

    Used-vehicle auctions are for now virtually paralyzed, much like the rest of the economy. The grave concern market watchers have is that vehicles already are starting to pile up at places where buyers and sellers make and take bids on cars and trucks -- and that this imbalance will last for months.

    If that fear is realized and prices plummet, it will be detrimental to automakers and their in-house lending units, which likely will have to write down the value of lease contracts that had assumed vehicles would retain greater value. Rental-car companies also will get less money from selling down their fleet of vehicles, which are sitting idle amid a global pandemic that’s been catastrophic for travel.

    [...]

    Automakers are doing what they can to limit the damage. General Motors Co. and Ford Motor Co.’s finance units already are offering customers one-month lease extensions. In addition to relieving pressure on consumers wary of going into showrooms, this will delay some of the influx of off-lease vehicles headed to auctions that are for now operating only virtually.

    [...]

    Rental-car companies that appealed to the Treasury Department and Federal Reserve as a group last month for loans, tax breaks and other forms of support await a similar fate. Hertz Global Holdings Inc., Avis Budget Group Inc. and Enterprise Holdings Inc. all are trying to find ways to unload some cars without taking too big of a hit, said Keller, a former Dollar Thrifty Automotive Group Inc. board member.

    3 votes
    1. AugustusFerdinand
      Link Parent
      Earlier this month Ford indicated that it wants another cash for clunkers program to stimulate car sales. For those that don't recall or are too young to remember, it was a 2009 stimulus...

      Earlier this month Ford indicated that it wants another cash for clunkers program to stimulate car sales.

      For those that don't recall or are too young to remember, it was a 2009 stimulus initiative that completely failed to do what it was intended to do, reduced availability of used cars in the price range for low income individuals, and ended up destroying several valuable and/or rare vehicles.

      5 votes