With the deadline just a week away, now’s the time to nominate executives and companies for the 2009 Auto Finance Excellence Awards, which celebrate achievement in the auto lending and leasing arena.
These awards recognize executives or companies that have made the greatest contribution to the auto lending and leasing industry in the past year. The awards will be announced at the Auto Finance Summit 2009 in mid-October and in Auto Finance News.
Executives or companies may be nominated for their:
• Overall lifetime achievements and/or contributions to the advancement of automotive financing;
• Charitable and/or community activities;
• Specific innovations in product development, management, and/or strategy; or
• Involvement in specifically noteworthy deals and/or joint ventures.
Submit nominations at www.AutoFinanceExcellence.com until Sept. 4.
Here’s a little calculation, the sort of back-of-the-envelope exercise in which economists indulge. I don’t have 2008 data, but I don’t think that would affect my bottom line (lines?).
1. During the previous 4 years of the bubble (2004-2007) sales averaged 16.7 mil, scrappage 11.1 mil, and thus net additions to the vehicle fleet averaged 5.6 mil.
2. In the 4 years before that (2000-2003) sales averaged 17.1 mil, scrappage 12.9 mil, and net additions 4.3 mil.
3. So if we compare the two we added 5 mil excess vehicles during the bubble, mostly light trucks.
4. From another angle, if scrappage is about 12 mil (the 10-year average) and new drivers are 2 mil a year then we get underlying demand of 14 mil, add say 1 million more for business use and “normal” sales should be at most 15 mil a year. Certainly not 16+ mil.
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If that’s the case, then we could have a long and painful adjustment to bring us back to “normal” — several years of sales of 13 million or less until the number of vehicles per driver falls a bit, and then sales rising to equilibrium. All of course premised on car quality not having improved over the past decade (median car age was 8.3 in 1998, 9.2 today).
Plenty of ways this calculation could go wrong. And I hope I am wrong. Lots of cars sitting in garages while people use their SUVs (or maybe the other way around) with no pressure to get rid of the “extra” vehicle, hence not so much excess. A big cash for clunkers program designed to reduce the number of used cars and pull up prices overall. New technology (regulations) that lead to faster scrappage (including not-so-old cars in great mechanical shape that “only” have fried electronics).
I dislike the idea of added new-car incentives: with longer intrinsic vehicle quality, shouldn’t depreciation be lower / residuals much higher than what our incentive-laden sales fever has given us? For other reasons (“monopolistic competition” — if you don’t know, don’t ask) I’m not sure we can in fact get rid of incentives, but they sure have come back to bite the industry.