Buying on Credit
Once you get past "The Sky is Falling" mentality of media headlines and take a look at what really goes on in the auto industry, this is the time to belly up to the sales bar and get that new vehicle. There are important points to consider before you do so, but they are no different than they were a year ago. You need to ask yourself if you need a new vehicle and if you can pay for it.
Easy credit and most leases are gone. Leases disappeared because of the money sucked out of the market by the sub-prime mortgage fiasco. Think of it this way, there is a large pool of credit supported by book values of loans. Everyone who owns this "paper" has paper profits.
When houses started to go into default, the paper profits went away. Such huge amounts literally disappeared (default on a $500,000 house that can now be sold for $200,000, if it can be sold at all, makes a bigger dent in the balance sheet than defaulting on a $30,000 lease where the lease can be resold for $10,000) that there was no real money left for leases.
Chapter 11 Protection
For the moment, assume that GM (it would be the same for Chrysler or Ford) goes into Chapter 11 bankruptcy. Chapter 11 in the USA is protection from creditors, not a 'going out of business' plan. It allows the company to reopen all aspects of its business, including union contracts (all those benefits we hear about could disappear by court order).
Plant closures were a fact of life before this credit crunch came. GM had already announced it planned to shut four of its eight truck plants. What remained was negotiating with the union to see how much it would cost. Now the process would be sped up.
Suppliers
At the supplier level, some suppliers may well go out of business or into Chapter 11 as well. When the dust settles, the suppliers will still be in business, but transformed into some form of leaner, more dynamic companies.
Dealerships
At the dealership level, there will undoubtedly be closures. For decades, making money in a dealership has become more and more difficult. The best and, to some extent, the lucky will survive. As for the others, many would have closed anyways. There are quite a few smaller, rural dealerships that will exist only as long as the current owner stays in business. The manufacturer will not transfer dealership rights to a new owner.
Parts And Service
Parts and service will continue much as before. In a nutshell, if you can get parts for your '49 half-ton, why do you think you won't be able to get parts for your 2009? Service is much the same. The diagnostic tools already exist and much of the technology in your new vehicle belongs to someone else.
Denso, Siemens or Bosch most likely provided the fuel injection and electronics. Other companies make the glass, interior plastic, seats, etc. The moulds and computer programs exist, the physical plants exist. Someone will buy them, make the parts and sell them.
Once you get past "The Sky is Falling" mentality of media headlines and take a look at what really goes on in the auto industry, this is the time to belly up to the sales bar and get that new vehicle. There are important points to consider before you do so, but they are no different than they were a year ago. You need to ask yourself if you need a new vehicle and if you can pay for it.
Easy credit and most leases are gone. Leases disappeared because of the money sucked out of the market by the sub-prime mortgage fiasco. Think of it this way, there is a large pool of credit supported by book values of loans. Everyone who owns this "paper" has paper profits.
When houses started to go into default, the paper profits went away. Such huge amounts literally disappeared (default on a $500,000 house that can now be sold for $200,000, if it can be sold at all, makes a bigger dent in the balance sheet than defaulting on a $30,000 lease where the lease can be resold for $10,000) that there was no real money left for leases.
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Chapter 11 Protection
For the moment, assume that GM (it would be the same for Chrysler or Ford) goes into Chapter 11 bankruptcy. Chapter 11 in the USA is protection from creditors, not a 'going out of business' plan. It allows the company to reopen all aspects of its business, including union contracts (all those benefits we hear about could disappear by court order).
Plant closures were a fact of life before this credit crunch came. GM had already announced it planned to shut four of its eight truck plants. What remained was negotiating with the union to see how much it would cost. Now the process would be sped up.
Suppliers
At the supplier level, some suppliers may well go out of business or into Chapter 11 as well. When the dust settles, the suppliers will still be in business, but transformed into some form of leaner, more dynamic companies.
Dealerships
At the dealership level, there will undoubtedly be closures. For decades, making money in a dealership has become more and more difficult. The best and, to some extent, the lucky will survive. As for the others, many would have closed anyways. There are quite a few smaller, rural dealerships that will exist only as long as the current owner stays in business. The manufacturer will not transfer dealership rights to a new owner.
Parts And Service
Parts and service will continue much as before. In a nutshell, if you can get parts for your '49 half-ton, why do you think you won't be able to get parts for your 2009? Service is much the same. The diagnostic tools already exist and much of the technology in your new vehicle belongs to someone else.
Denso, Siemens or Bosch most likely provided the fuel injection and electronics. Other companies make the glass, interior plastic, seats, etc. The moulds and computer programs exist, the physical plants exist. Someone will buy them, make the parts and sell them.