US no longer the heart­land of the mo­tor in­dus­try

Finweek English Edition - - Cover -

IN THE UNITED STATES things are even worse. Hordes of Amer­i­cans are keen to get rid of their huge gas-guz­zlers and buy some­thing smaller. Not so easy. The prices of big SUVs have fallen so much that many Amer­i­cans also find them­selves in the un­en­vi­able po­si­tion where the trade-in value of the ve­hi­cle is worth less than the out­stand­ing amount owed. The list of how the prices of a few sec­ond-hand SUVs in the US have fallen looks like good news to many prospec­tive SA own­ers of one of those ve­hi­cles, while ex­ist­ing own­ers be­come just a lit­tle more wor­ried.

In the US, one in ev­ery five new ve­hi­cles is sold via leas­ing rather than hire pur­chase. Chrysler opted for all its ve­hi­cles to be sold via leas­ing. Typ­i­cally for that type of trans­ac­tion there’s no de­posit, 60 monthly pay­ments and a resid­ual value of 30% of the pur­chase price af­ter 60 months. How­ever, the prices of those ve­hi­cles have fallen so much that an hon­est val­u­a­tion of the leas­ing con­tracts would re­sult in a sig­nif­i­cant loss.

In fact, just last week Ford’s fi­nanc­ing sub­sidiary did a spe­cial write-off of US$2,1bn on its out­stand­ing leas­ing con­tracts be­cause the value of used cars had fallen so sharply.

For the man in the street there’s lit­tle chance of es­cape. Due to the poor prices of large sec­ond-hand SUVs, and even sedan cars, there’s now no pos­si­bil­ity of trad­ing in such ve­hi­cles for smaller, more fuel-ef­fi­cient ones. The dif­fer­ence be­tween the trade-in value of a large ve­hi­cle and the out­stand­ing bal­ance at the bank is so large that no trans­ac­tion is pos­si­ble, even if the dealer adds ev­ery pos­si­ble cent of dis­count on the new ve­hi­cle to the trade-in value.¤

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