How will the Credit Crunch affect car sales?
It’s becoming more and more difficult to obtain a loan for anything since the announcement of “The Global Credit Crunch“.
Banks are struggling to sustain credibility and finance companies are changing their strategies and loan approval criteria.
Many finance companies have announced that they are removing themselves from the “Sub-Prime” marketplace and accepting fewer cases. This can only mean one thing…the cases that these companies do accept will have to be more profitable so that they can plug the gap.
But what does all of this mean for the Motor Industry in general? Well, to my mind, I think we’ll see fewer people accepted on finance, which will mean fewer cars, bikes and trucks will be sold. The knock-on effect of this means that residual values will be reduced because we have a slow down in sales at the bottom end of the sales chain.
If we become less successful at selling used cars, used trucks, used vans and used bikes that means that businesses will suffer the effects of cash flow and everything will get tighter.
If manufacturers don’t see this happening and continue to push sales volume targets on new vehicles, then residual values will fall at a colossal rate because no one will want to take the volume of part-exchanges.
Here again, we see evidence that used vehicles provide the kingpin around which a franchised dealership revolves. These dealers who are good with used vehicles will do well. Those dealers who are not good a used vehicles will be at the mercy of the market and things are not looking too good at the moment.
What do you think will happen in the remainder of 2008?
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