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Entries in Financial Services (4)

Thursday
Dec152016

Its a Car not a House!

Do you remember when the auto business was melting down in North America in 2008/2009, agreed it almost looks like ancient history today.

Back then an inexorable shift from leasing which had a 50% penetration in Canada to finance terms (usually longer) was initiated by all the manufacturers with a few exceptions. The thought vector was simple "let's shift the residual risk to the consumer" taking it off the books of the manufacturer controlled captive finance companies.

We all know the auto business works best on a 36 month cycle. With time the auto business in Canada embarked on a voyage of rolling over deficiencies (on trade ins) and pulling ahead from an 84 month term to a 36 month cycle.

Looking at data from JD Power Market Metrics YTD November.

..................Lease.......Finance.......Over 72 Months

2012............21%.........61%.................58%

2013............19%.........62%..................62%

2014............23%.........59%..................67%

2015,,,,,,,,,,,,26%.........57%..................74%

2016............26%.........57%..................72%

If you conclude that CMS (Citizen Main Street) who had a strong affinity for leasing a vehicle is now caught up in a circle of rolling over deficiencies...we agree with you.

Manufacturers and financial service providers are caught up in having mechanisms to "roll over" deficiencies. While prices, and incentives are inexorably increasing.

Reflect on this...CMS who usually agrees to a 5 year mortgage term on a 25 year amortization period, is on at least a 6 or 7 year term for a vehicle.

Needless to tell you that the average monthly finance payment has escalated from approximately $530 per month in 2012 to approximately $575 per month in 2016.

Terms get longer while monthly payments creep higher.

The overview of Creeping Auto Loans in Canada.

The remark from the individual in the back of the room "How long can we keep this up?"

A different view...

Click on image to enlarge

 

Tuesday
Oct182016

Citizen Main Street and Money

Sometime ago we coined "Citizen Main Street" or CMS for short as the average individual in Canada. From our perspective at the time CMS was a better term than consumer, or customer, or prospect, or owner, or credit card holder, and so on.

We all know who we are, what we do, how we do it, the possessions we have, and so on, and on.

Take this individual put him on main street, anywhere in Canada, and that is CMS.

CMS buys all sorts of stuff, including cars, utilities, real estate to name a few. CMS has kept the Canadian economy humming along for a few years now.

We agree...money has been flowing freely in Canada for several years, and there is an entire generation of CMS that has grown, evolved, with easy access to various forms of credit.

Obvious there are the pundits, experts, analysts, and various organisations all expressing opinions, and lately increasingly dire messages, about dire consequences towards CMS, and Canada.

We keep on hearing about the great depression of 2008/09 which sort of never happened in Canada. We know that many Canadian companies, or the Canadian arm of companies from other countries are sitting on a ton of money, and not investing it in Canada.

Yes...CMS cannot keep the Canadian economy going on indefinitely...we all knew that...or should have known that years ago.

Hopefully you grasp our direction here.

What does it have to do with the car business? Simple...you need prodigious amounts of money to make the business work.

There is an entire generation of CMS that has evolved with computers, technology, smart devices, easy access to credit, easy access to loans for education, easy access to loans for vehicles, and easy access to mortgages.

In many instances "big brother" was somewhere in the back ground facilitating the various "financial services" in one fashion or another. Like all human endeavors there are always areas for abuse, and perhaps even for greed to kick in.

Now "big brother" is altering the ground rules in some areas of the financial services applicable to real estate. Which is generating a myriad of opinions from literally everyone, with an undertone of dire consequences.

What does it have to do with the auto business in Canada? What do you think?

 

 

Wednesday
Oct122016

Canadian Sales Three Quarter 2016

It keeps on going...

 

 

Monday
Mar282016

Creeping Auto Loans

Our thoughts on longer auto loans in Canada...