• Car Sales Plummet: Time to Buy? (Or lease?)

Car Sales Plummet: Time to Buy? (Or lease?)
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Merely a month ago, at the North American International Automobile Show, the party line from General Motors, from it’s boss, Rick Wagoner, on down was that new cars sales in 2008 would match those of 2007.

That prediction didn’t seem credible at the time – but, one can understand car company executives not having an interest in downplaying the sales forecast. That could end up being a self-fulfilling prophesy.

But, there’s no longer room for such optimism.

(more after the jump)

Even Carlos Ghosn, the ever-optimistic head of Nissan and Renault, says that 2008 is going to be a bad year for new car sales. In fact, according to Dow Jones MarketWatch website, Ghosn says that the United States auto market is the biggest single threat facing Nissan.

February auto sales were off 8% overall and sales of the domestic automakers dropped 12% at General Motors and 16% at both Ford and Chrysler, according to provisional data published by the Detroit Free Press. The decline in GM sales was deepest in the truck line, while Chrysler sales continued to be affected by the lack of new products in their line-up.

Projected over the entire year, on a seasonally adjusted basis that predicts new car sales, 2008 sales are expected to be as much as 1.2 million vehicles below those of 2007.

That is not good news for Ford and Chrysler.

Ford’s sole bright sales spot was the Focus, which had January sales up 44% over a year earlier and continued as a strong seller in February. Focus sales appear to be driven by Sync, with nearly 40% of the new Focus’s sold being delivered with that optional technology. Overall, though Ford picked up 2% in market share in the small car segment, Ford’s sales have been poor and are expected to continue that way based, as one analyst quoted by the paper said, upon Ford’s “weak product portfolio.”

Chrysler’s new owners, Cerberus Capital, recently sent a letter to its investors in which they acknowledged that a “meltdown” in U.S. auto sales would imperil the company.

So, what’s that tell you?

If you’re in the market for a new car, this may be the year you should be doing it

– particularly if you’ve got cash. If you’re a real bottom-feeder, look at a new F-150 or Dodge Ram, once the entirely new models are in the showroom. (Or, if you’re the kind that will do anything to save a buck, think about a Toyota Tundra.)

At Cadillac, forget about the CTS: look at the Escalade and the DTS. At Ford, consider the Taurus. At Pontiac, the Solstice – Saturn’s version is seriously outselling the Pontiac, and dealers haven’t got much to sell right now. If you’re a venturesome person and you want a G8, wait a few months – small block V-8 G8s are going to be a dog on the market about the time the snow flies in the fall, rear wheel drive and a V-8 is not a Northern climate winner.

And, don’t forget about the Corvette. GM is overproducing them. There are even deals around on the ZO6, but the base ‘Vette is currently a steal. For forty grand, you can’t go faster.

But, the absolute best deal out there:

The Chrysler Town and Country minivan. The bloom is off the van market, but the Chrysler and Dodge equivalent minivans are so good that the Wall Street Journal ranked the new Town and Country as the best vehicle – not van, vehicle – in its price segment and Volkswagen hired Chrysler to build a version that VW could sell under their own name, that would reflect the concept of German craftsmanship that VW believes is the way it gets to demand a premium price.

Now – here’s the kicker: when Cerberus bought Chrysler, they also bought Chrysler Financial. Shortly before that, they bought a majority stake in GMAC. Cerberus needs cash flow, which means they need to sell Chryslers and finance them – keeping the cash flowing into Chrysler financial is the only way they keep their investment afloat.

So, lease. You can absolutely bet that they’re playing in fantasy land with the residual values to keep the cash flow numbers at Chrysler Financial looking healthy.

Ralph Kalal
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  (5990) posted on 03.6.2008

great article. thank you for it. it really makes me think about a new car this year! and i agree with phil. if you could make a top ten ’car bargain’ list that would be awsome

  (5990) posted on 03.5.2008

Very interesting article, why don’t you make a top ten ’Car Bargain’ list smiley

As you said there are deals to be made...

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