Car sales went to accident

The mainstream media have portrayed the robust auto sales, which implies a booming economy of new funds from consumers being poured into pent-up demand for cars past. Bloomberg reports:

       Frigid end can not stop better US Auto Sales Year Since '07
       GM joins Ford With Auto surprisingly robust June sales

But there is more to do under the hood?

In a revealing article entitled Auto news "Auto Sales would be higher in a normal recovery," there is evidence to show not only the industry recognize that sales are not representative of a "normal recovery", but indicates a weakness financial in a key demographic -Buy car.

"If it was a normal recovery, the automotive industry has to sell a lot more cars than it is this year. But this is not a normal recovery, Italy Michael said, director of CIT Investment Research and Analysis.

Michael said and the life of the vehicle and settle for less vehicle families have a profound impact on the number of cars sold.

The main question now things? No consumers in their C's defer purchasing decisions. There are young families who do not feel financially secure. "

New car loans to borrowers with lower credit ratings increased 51% in the first quarter compared to the same period in 2013, according to Experian Automotive.

Meanwhile, new auto loans to borrowers with higher credit ratings fell 7% during the same period.

In a related article by Tyler Burden, "The only missing link was the disposable income of consumers. Example, car sales through the roof, consumption in the United States must be alive and well, right ?.

Almost all the growth in the automotive sector in the United States in recent years has been the result of a near-record increase in rental cars (which as we know standards high risk, so your credit is not a problem) does not buy directly.

Leasing increases: household spending on leasing are growing at a rate of 20% year on year, a clear sign that demand for vehicles is alive and well.

With lower payments than the average monthly cost of ownership and with a down payment is usually not necessary to enter into a lease average rent increased car rental is probably a sign that financial constraints still hinder some potential buyers .

It could also lead to even higher rent, which in turn bottlenecks, actual sales real. Of course, the problem is that the lease is not to buy anything. Rent, usually for a period of about 3 years.

This means that, at the end of this period, a series of car is returned to the dealer and therefore the automaker, which must then throw it on the market at bargain prices, which in turn distorts the calculation ROMA massively.

However, what it does is to give the impression that there is an increase in activity here and now ... the whole coast of massive depreciation of stocks in three years.

This is precisely what will happen to all car manufacturers such as leased vehicles pay the consequences. Meanwhile, shopping ZIP, forgiveness rental frenzy. "

In short, loans for buying cars are issued to people with no or bad credit, leasing and vehicles are up to 20%. These subprime loans and leases is presented as strong car sales, indicative of a booming economy.