The Conservative Cave
Current Events => Economics => Topic started by: thundley4 on March 03, 2010, 08:52:21 PM
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Zero-percent financing is the last resort of a desperate car company. Financing has historically been a lucrative sideline for automakers (the last few years notwithstanding); indeed, Ford and GM were frequently described as banks with a sideline in manufacturing. That was a pretty accurate reflection of where they were making their money--and an explanation of why they stopped, when debt markets when haywire.
Toyota is a sort of desperate company right now. So it's not surprising that they've rolled out 0% financing on many of its most popular models. Nor is it surprising that this has forced American automakers to follow suit:
As if in response to Toyota, GM on Tuesday offered 0% financing for 60 months or more on a range of 2009 and 2010 models, following a weak February and a recall of its own. Brian Johnson of Barclays Capital estimates such financing costs $4,657 a vehicle, more than $2,000 above last month's industry average incentive package. The key question is whether this is temporary or signals a broader breakdown in pricing discipline. After all, consumers are still hurting and the industry remains structurally oversupplied.
Anyone who thought that the Big Three were finally getting a break when the chairman of Toyota was hauled in front of a congressional committee again. Zero-percent financing for five years is going to make it very difficult for GM to return to profitability--and presumably Chrysler will be forced to follow suit. These companies are going to be on taxpayer life support for quite some time.
The Atlantic (http://www.theatlantic.com/business/archive/2010/03/toyota-drags-rivals-down-with-it/36969/)
Once again we witness the law of unintended consequences. This administration and the complicit media has done their best to keep the problems of Toyota front and center, leaving Toyota little recourse to salvage their sales. Now it will end up costing the American car companies lost revenue. :hammer:
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GM just recalled 1.3 million cars for the same problem.
I'm waiting for the Congressional hearings and FBI raids.
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GM says the issue is because of a shared supplier.
Ford sales were up 44% this month. :cheersmate:
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Very few people actually qualify for zero % financing.
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Watched a throttle replacement the other day on the tube. Sure looked like a "fly by wire" system to me. So there is either a program problem, a feedback loop, or electrical interfearance. Doubt there was anything at all with the actual peadle assembly at all. I'd fix by patching in a seperate wiring harness and linkage and throtle setup, sharing only a ground with the rest of the elecrtical system. And I'd completely disconnect the original wiring attached to the engine maint, system.
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It's not Toyota dragging it rivals down, it's simple economics:
Automakers exist as an oligopoly, producing goods that can substitute for each other. When one member of an oligopoly lowers their price on a good, the other producers are forced to do the same or lose market share. Same mechanism that makes airlines lower fare prices in response to one cutting ticket prices.
And my last auto purchase was a 0% financing deal... it was awesome to have 60 months same as cash ;)