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Entries in Financing (3)


The Evolving Ownership Model

In Canada we are setting an auto sales record this year that has never been seen. A few months ago we mentioned that free flowing money was powering auto sales. As usual (not to brag) we were ahead of the "pedestrian opinions" in making it clear that money was super charging sales. 

Its interesting to see main street catch up to the fact that money is super charging auto sales. While being fixated on an antiquated ownership model

Think about this for a moment....

A few years back at least 50% of Canadians did not own a vehicle, it was leased. Is it fair to say that in Canada vehicle ownership was never a high priority. 

Canadian banks were not allowed to lease vehicles, while some manufacturers abandoned the leasing segment. Did CMS (Citizen Main Street) have an overnight epiphany, and do an immediate about face from leasing to ownership? What do you think? 

Reflect on this...

The monthly payment for a vehicle persists in the + or - $500 per month range, its almost a constant through the years. Be it a lease or a finance the monthly payment remains constant.

The interest rates are subsidized by manufacturers at close to 0% for the term of the financial product (lease or finance).

The finance terms are getting longer to keep the payments at $500 per month and to roll over deficiencies.

The auto business works best on a 36 month cycle, not an 84 or 96 month cycle. While CMS starts considering a new vehicle in the 24-36 month time frame.

Its obvious that CMS does not have a strong desire to actually own, or have equity in a vehicle.

Consider the following...

Executives, captive finance companies and the mainstream media remain attached to a conventional ownership model, and the notion of equity in a vehicle. Its been a valid model for countless decades. While keeping in mind that we were at 50% leasing penetration a few years ago. The "ownership model" was already strained at the time.

Independent financial service providers understand that manufacturers have little choice than to continue subventing interest rates for the mid term. While facilitating rolling over deficiencies. In addition these providers do not subscribe to an ownership model. They make a credit decision based on risk, and ability to repay on a monthly basis. Until the vehicle, the deficiency fit within the risk parameters its all good.

Ownership inexorably morphing into mobility...

CMS has a strong and enduring appetite for new vehicle mobility (transportation) at $500 per month. CMS has less of an appetite for actual ownership (equity), vehicle maintenance, issues with older vehicles.

Manufacturers, dealers, financial service providers, the auto industry is providing mobility at $500 per month. While being creative and innovative to continue providing mobility for $500 per month.

Did manufacturers ever think that shifting the lease residual risk to CMS while reinforcing an "ownership model" with finance terms. Would migrate into a "mobility model" with CMS empowered by manufacturers to stay mobile at $500 per month.

What do you think?





Vroom Room

Good Morning!

Yes its Friday, its the Vroom Room, come in join the conversation, enjoy the cappuccino and biscotti. 

The Colonel had a Milestone event yesterday, but we are not going there.

As the BMW i3 buzz increases, just remember that we mentioned this car when it was launched back in July, in our case the carbon fiber grasped our attention...obvious the electric too.

In case you missed our thoughts on Canadian Sales, just scroll down a few days. Yes...this longer and longer finance terms are perhaps reaching the end of the road. Agreed its also a brave new reality...

Perhaps you remember that 40 years ago was the first "gas shock" with the embargo, and we first started realising that perhaps some of the vehicles we were driving were not fuel think! That was also the time when catalytic converters, unleaded gas started surfacing. 

There has to be an entire generation that does not know the "sweet aroma" of untreated exhaust gases that were emitted at the time. 

Think about this, the sweet aroma of exhaust fumes, accompanied by the nicotine aroma since almost everyone smoked in cars, and how rare it was it was to find an unused cigatrette lighter, or an empty ashtray. Back in the day it was "perfectly normal" and expected.

Our usual old race cars, this is very special...old race cars, old photos, serious nostalgia Motor Binder...Bev Spencer



Money for the Deal

Our first "ebook" of 2013...