Reason behind poor car sales finance, not market?

Wednesday, January 28th, 2009 at 08:54

Kathy asked:

One of the hardest hit buy prescription drugs online sectors of the economy seems to be the auto market, as few people are willing to buy. Auto executives are blaming down markets for the problem, but I think I see a different one:

The automakers financing, and by extent, lack of reasoning. The prime rate is historically low, and yet the rates I can see on 60 months for a car range from 3.9 to 5.9 percent on more fuel efficient vehicles that people actually want to buy (but can't, due to the high cost of financing). Dodge may be the worst offender: Its offering 4.9 percent for 60 months on its Caliber wagon. This is a car that loses $6000 of its value in the first year, hardly something worth financing at that rate. Ford is probably one of the better, ones, offering 1.9% financing for 60 months.

The single biggest reason I see people turning down new cars is financing rates. Yet, automakers insist on high rates.

What do you think, is the market bad, just bad, or are automakers to blame?

Additional Details
Note to John: wise move if you can find it, but this is about the economics of automakers thinking. The question is, in simplified terms, are automakers to blame for their own poor sales when they offer rates as terrible as what we are seeing in the market for cars that would otherwise (if rates were lower) be in demand?

Reply:

I will never pay interest on a car again. 0% interest or nothing for me. And it needs to be invoice price.

Finance your car here onsite if you need help buying one of these beauties :)