For automakers, 2010 should bring some stability, with total U.S. sales of about 12 million vehicles and most carmakers turning the corner to profitability.
New-car dealers, however, will go through another rough year. Lenders’ tightfistedness will make it tough for businesses and consumers to spring for a new set of wheels, despite vehicle prices being about the same as last year’s.
Toyota dealers are in for an especially tough time in light of the safety recall and halt in sales of vehicles that account for roughly two-thirds of Toyota’s U.S. sales. Dealers’ earnings will be depressed for several months.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Meanwhile, lenders are likely to pressure dealers to step up payments on loans for cars sitting on lots for 90 days or more. That will weaken dealers’ cash reserves, increasing the odds they’ll run out of cash and have little choice but to close shop. Some may try to sell out to another dealer but that’s a “very tough sell in this market,” says John Pico, managing partner with Advising Automobile Dealers, a dealer consultancy.
Dealers selling used cars -- usually a profit mainstay -- face their own woes.Securing supplies of late model vehicles will prove unusually tough, requiring dealers to sweeten deals on trade-ins. Used car prices are likely to climb 5% again this year.
Uncle Sam’s Cash for Clunkers program last year helped dry up supplies, even though the 750,000 cars sent to the scrap heap were mainly older cars, sport utility vehicles and pickup trucks. Moreover, rental car companies, which usually send tens of thousands of vehicles to dealers and automobile auction houses, are keeping vehicles longer, reducing supplies.
The slowly rebounding economy and persistently high unemployment rate are boosting demand for used vehicles, too. “For many consumers, the only way to buy a vehicle is to get a used one, since the amount they need to finance is less than (with) new ones, and generally the APR (annual percentage rate) interest rates are a bit lower, too,” says Tom Webb, chief economist with Manheim Consulting, a used vehicle consultancy.
For weekly updates on topics to improve your business decisionmaking, click here.
-
The Stoic Retirement: Ancient Wisdom for Today's RealityA "Stoic retirement" doesn't mean depriving yourself. It's a character-based approach to life and aging that can bring calm and clarity.
-
My Teen Crashed His Car and Now Our Insurance Has Tripled. What Now?Dealing with the costly aftermath of a teen car accident is stressful. Here are your options for navigating it.
-
11 Outrageous Ways To Spend Money in RetirementWhether you have excess cash to spend or want to pretend, here’s a look at 11 ridiculous ways retirees can splurge.
-
AI Appliances Aren’t Exciting Buyers…YetThe Kiplinger Letter Artificial intelligence is being embedded into all sorts of appliances. Now sellers need to get customers to care about AI-powered laundry.
-
What to Expect from the Global Economy in 2026The Kiplinger Letter Economic growth across the globe will be highly uneven, with some major economies accelerating while others hit the brakes.
-
The AI Boom Will Lift IT Spending Next YearThe Kiplinger Letter 2026 will be one of strongest years for the IT industry since the PC boom and early days of the Web in the mid-1990s.
-
10 Things You Should Know About Buying a Car Today, Even if You've Bought BeforeIf buying a car is on your to-do list, and it's been a while since you went shopping for a new one, this guide will help avoid any nasty shocks in the showroom.
-
Amid Mounting Uncertainty: Five Forecasts About AIThe Kiplinger Letter With the risk of overspending on AI data centers hotly debated, here are some forecasts about AI that we can make with some confidence.
-
Worried About an AI Bubble? Here’s What You Need to KnowThe Kiplinger Letter Though AI is a transformative technology, it’s worth paying attention to the rising economic and financial risks. Here’s some guidance to navigate AI’s future.
-
Will AI Videos Disrupt Social Media?The Kiplinger Letter With the introduction of OpenAI’s new AI social media app, Sora, the internet is about to be flooded with startling AI-generated videos.
-
What Services Are Open During the Government Shutdown?The Kiplinger Letter As the shutdown drags on, many basic federal services will increasingly be affected.
