Monday 15 September 2008

Bad credit hurting sales more than fuel prices

The auto industry is in a bad sales slump, and while trucks and SUVs are being hurt particularly by fuel prices, the rest of the market has an even bigger problem. The tight credit market is making it much harder for dealers to sell you transportation, and the problem isn't relegated to just those with poor credit. Banks want higher cash-to-debt ratios, larger down payments, and then they're still charging higher interest rates on top of all that. GM's Mark LaNeve estimates his company is losing between 10,000 and 12,000 sales per month due to the credit crunch, which is close to a full point of market share.

Chrysler dealers are likely struggling even more, as the Pentastar recently removed company-financed leasing as a fall back option for those who cannot afford to buy. Chrysler's sales have been down 34% this year through August, and leasing went from 23.5% of the business to just 2%. With the latest rash of bad news hitting the banking industry in the U.S., we don't expect this trend to reverse itself any time soon.


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