Sunday, March 20, 2016

Wait for the "cash price" offering to buy your next car

Most car prices are ridiculous relative to US consumer spending power.  We know this because the auto industry has stooped to backing 6 and 8 year loans not only for new cars but for used ones.  This is telling me that debt is being used to buoy car prices and once the banks stop funding these dumb-ass loans, manufacturers will be faced with price wars and market dumping of their vehicles for a period of time while the market shakes out and some of the unneeded manufacturing capacity goes bankrupt.

Fitch is the canary in the coal mine as it is now (finally) evaluating the situation.  In other words, the delinquencies are getting so high now that they can no longer rate the associated debt very highly.  Once they downgrade the debt and the investors lose money in the deal there will be a sudden collapse in the amount of easy, cheap money for financing car loans.  That means sales will collapse and we will at some point have a great buying opportunity for great cars at firesale prices.

When I put in my solar array, I specifically timed the purchase of the solar panels with the bottom of the solar market crash as defined by my wave count of SPWR and FSLR.  When they were at the 5th of 5th of 5th I knew that it was time to pounce and I bought a bunch of good, German made solar panels for less than 50 cents on the dollar because of the BK of QCELL.  The price I bought them for several years ago is still below the lowest price I have ever seen since and that is saying a lot for something like silicon which generally goes down in price and up in efficiency over time (i.e. inherently deflationary).

So wait for your next car purchase.  Wait until you see the banks which are providing these hundreds of billions of stupid loan begin to collapse and to pull back their lending.  Wait until all the zero down financing offers are replaced by firesale prices for those with cash.  The revenge of the saver is coming to the auto market folks.  I give it 1-2 years max.  Nurse your existing car along until you seen these trigger signs.


Augustine said...

My 10 year old car has had its first major repair (thank you Honda), but I'm afraid that this is the beginning of its end. I've been eyeing an used luxury car model for a while, but until last year it was still more expensive than my budget. I was hoping that, as this year began, its price would be knocked off by 20%, as it used to be. Not so, rather, its prices remained steady, 3 months into the year. I know that credit is the culprit because the salesman I talked to last year was confused about my refusal to finance for more than 3 years. I chose to nurse my car for a while longer by replacing a couple of faulty electronic parts myself to restore its creature comforts. When the depression comes, the car model I'm eyeing will be as cheap to buy as Cord, Dusenberg and Packard cars were 80 years ago.

david sheff said...

Set aside 3-4 grand and she should be good for another 5years.
Or blow a load and start driving that car you esteem.

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