If you’ve been putting it off, when should you pull the trigger on the purchase of a new vehicle?
Well…right about now.
The plight of the auto industry has occupied a good amount of page one inventory, of late. Past stories of government bailouts, corporate mergers and the elimination of entire brands were the consequences of the bizarre mortgage situation and sharp increases at the pumps. The new headlines include Chrysler cutting 800 dealerships, Toyota adjusting its head office by 40% of its senior managers and GM Oshawa building its last Sierra truck. A Reuter’s story suggests that GM, like Chrysler, will close dealerships as part of its strategy to remain viable. Chrysler points to performance figures that suggest 90% of their unit sales arrive from half of their current dealerships and that becomes a partial justification to move from 3200 dealerships to 2400 (Toyota has 1200).
So, what does this culling of the herd mean?
It means fewer dealerships, decreased inventory, smaller parts stores and the low prices we currently see for new vehicles will end. Economics 101 suggests that the price of an item can be determined where supply meets demand. It follows that a reduction in supply of a product can influence both demand and the price people are willing to pay for it. Less production (1) shortens supply (2), leading to an increase in demand which produces a rise in prices (3). I should also expect that the programs and incentives we’ve come to know and love will disappear. Not discussed are the implications for people who already own these brands; fewer dealerships means less service bays and, obviously, fewer factory endorsed mechanics.
For us it means the price of new vehicles will be at historic lows…until demand on inventory surpasses supply. When you’re wheeling and dealing, perhaps it’s better to negotiate a longer warranty instead of the heated leather seats…knowing the shop rate will likely increase as the
supply of service bays drops?
On a related note, the Oshawa plant has churned out more than 10 million vehicles over the last 44 years. The last GMC Sierra was driven off the line by a 45 year GM employee and given away in a raffle among staff.
Well…right about now.
The plight of the auto industry has occupied a good amount of page one inventory, of late. Past stories of government bailouts, corporate mergers and the elimination of entire brands were the consequences of the bizarre mortgage situation and sharp increases at the pumps. The new headlines include Chrysler cutting 800 dealerships, Toyota adjusting its head office by 40% of its senior managers and GM Oshawa building its last Sierra truck. A Reuter’s story suggests that GM, like Chrysler, will close dealerships as part of its strategy to remain viable. Chrysler points to performance figures that suggest 90% of their unit sales arrive from half of their current dealerships and that becomes a partial justification to move from 3200 dealerships to 2400 (Toyota has 1200).
So, what does this culling of the herd mean?
It means fewer dealerships, decreased inventory, smaller parts stores and the low prices we currently see for new vehicles will end. Economics 101 suggests that the price of an item can be determined where supply meets demand. It follows that a reduction in supply of a product can influence both demand and the price people are willing to pay for it. Less production (1) shortens supply (2), leading to an increase in demand which produces a rise in prices (3). I should also expect that the programs and incentives we’ve come to know and love will disappear. Not discussed are the implications for people who already own these brands; fewer dealerships means less service bays and, obviously, fewer factory endorsed mechanics.
For us it means the price of new vehicles will be at historic lows…until demand on inventory surpasses supply. When you’re wheeling and dealing, perhaps it’s better to negotiate a longer warranty instead of the heated leather seats…knowing the shop rate will likely increase as the
supply of service bays drops?On a related note, the Oshawa plant has churned out more than 10 million vehicles over the last 44 years. The last GMC Sierra was driven off the line by a 45 year GM employee and given away in a raffle among staff.
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