Today’s release of a TransUnion’s report stating new car sales projections will increase to 13 million in 2011 is false and misleading holiday yule-tidings as far as I am concerned.
Let’s read between the lines and really understand what the future of new car sales will really be based on in 2011.
1. “Super-Premium” credit scores. 2. Lease terminations coming due. 3. Consumer confidence to lease again.
25% of those clients with leases coming due this year WILL NOT be able to lease again.
Three years ago a consumer with a 700 credit score was considered “super”, thus receiving a preferred rate on a lease subsidized by the auto manufacturer to help sell bloating inventories or to maintain market-share against the competition.
Today the same client will not be able to lease because his/her credit score is no longer a 700. This is due to a trifecta of rising personal debt, home foreclosures and a national trend by credit lenders to lower limits, even on those with perfect car payment histories.
In addition, there are three credit reporting agencies: TransUnion, Equifax and Experian, to which the various car dealerships and auto loan institutions subscribe with varying degrees of commitment.
In fact, many of the car manufacturersfinancing divisions and private auto loan banks have created their own internal scores and procedures using the credit report auto score as a base line for dealer submissions, NOT the end all be all.
TransUnion’s statement that leasing clients will be welcomed back based on their previous buying power would beg me to ask the question; “Does TranUnion know something I don’t?
The answer is YES. With the recent hiring of a national consumer financial watchdog perhaps TransUnion and their credit reporting friends are changing their factoring system to recognize car payment history RISK above such credit devastating factors as short sale late payments, home loan modifications and principal balance forgiveness on mortgages.
Another reason TransUnion’s suggestion of a 30% bump in new car sales attributed to leasing won’t fly, is the reduction of incentivized leases in the luxury brands: BMW, Audi, Mercedes.
Why these three in particular? These Euro brands realized their primary client, the US business person was driving status at the cost of market-share. With the fluctuating dollar, it is more profitable to sell their production elsewhere in the world, hence a drastic reduction in the almost $200.00 a month payment savings factory incentives have provided in the past. Furthermore, as U.S. business’ look at their bottom line, the average luxury car $700.00 a month payment is no longer an acceptable expense.
BTW: Look for these luxury car lease terminations to show up on used car lots thousands off their residual values, where the previous leasing client will buy back his car at a savings of 20%, (including a certified warranty and reasonable low finance rate for 48 mos.) providing luxury car makers use internal payment history to offer competitive borrowing rates.
Lastly, the previous three years have severely altered the baby boomers perspective on wants and needs while deteriorating general consumer confidence in Generation X,Y and Z. Leasing as a means to get more for less in your car purchase, has given way to dialogue and debate over long term vehicle quality, 100K mile warranty and changing fuel technology. Thus, the almighty credit score will become a factor in what is the best deal on the market, in some cases pushing buyers to drop down in make and model.
Either way, the trend in consumer confidence, lower credit scores and payment driven buying, will not make buyers into leasees but it may make habitual leasees into buyers…
Welcome to the “new Normal” of the car sales economy.
—————————————————————————— If you need any car buying, selling, trading or financing assistance on any new or used vehicle, please do not hesitate to email me at sarahlee@mycarlady.com,mvides422@gmail.com,carlady@cox.net or give me a call; 702-521-7546 I’m here to help you with any of your automotive needs and advice is ALWAYS free. Sarah Lee is an automotive executive with 22+ years of experience. She writes about Cars, and is a staunch consumer advocate on car related subjects. Her company: MY CARLADY is a personal car consultant service committed to helping you buy your next car and understand how to get the best deal on your next new or pre-owned vehicle. You can reach her at email to: sarahlee@mycarlady.com,mvides422@gmail.com,carlady@cox.net
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