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Friday, 30 August 2013

Vehicle Sales Boom in August

 Vehicle Sales Boom in August
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A Short Story

Wow! August vehicle sale are expected to be hitting full stride for the month, coming in at a seasonally adjusted rate of 15.7 million vehicles. That is the highest level in almost seven years. Good news - right? 

The biggest concern is what lies ahead as today's sales are pumped-up by the lowest interest rates for the longest period of time ever. Don't be fooled by 0% financing deals, because that is really a crafty way to move margins between business divisions to effect market pricing to consumers. In the end what counts is the consumer's monthly cash payment, particularly in the months and years ahead.

Like the airline industry there are dark clouds and turbulence on the horizon that will come from an imminent spike in interest rates along with rising oil prices. A one, two punch! Imagine what happens to vehicle sales when interest rates cause monthly payments to double, together with substantive gas pump increases as peak oil consequences unfold? At the same time product production costs will rise dramatically because they are affected by both rates and oil prices. Annual sales have the potential to drop by 25-40%, or more.

Our industry weather forecast calls for  - "expect heavy cloud cover and turbulence as you approach. Slippery runways. It's raining hard on a parade down there" 

How's that for a short story?

First Financial Insights
August 30, 2013

Interest Rates? Oil Prices? Production Costs? ... Again! 
Who would have thought?

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