Thursday, January 11, 2018

Who's Going To Stop Me

We all know we fucked up and continue fucking up. The problem is that if we continue this pattern we will let the bottom fall out of the American auto industry. Start with the numbers --- and what they don’t tell you. The global outlook is still very healthy, showing 2.7% growth in 2017, while sales in the United States dipped just 1.75% for the year. Those metrics are both irrelevant to the “plateau” the US auto industry is expected to face from 2018-2019 though, and the reason is because they were generated by pulling out every last ethical, legal, and tactical stop.

It’s not that we have nowhere else to go but down; it’s a case of having no further down to go. Everybody has accepted and acclimated to the way we generate new auto sales, from the desperate desk manager who will do anything to get a deal bought to the customer who has no ability to think beyond a payment and a new-car smell.

This dark momentum could strangle the industry, but everyone refuses to stop it. Every time a customer accepts a $500 monthly payment on another overpriced compact crossover, they are feeding that momentum. When dealers structure deals for far more than the car is worth, they are feeding that momentum. The problem is: who is going to actually tell anybody no? Customers want their cars and refuse to put money down to get them. A large number of dealerships are fighting to attain sales numbers the market can’t currently support.

I get cursed out every month when our store misses the targets set for us by the manufacturer, even though I’m fighting against larger stores offering deeper discounts on new cars. On top of that, it’s not just your credit criminal customer that isn’t reading what they’ve signed anymore. When you have consumers with 700+ FICO scores rolling over portions of debt they already couldn’t handle on top of new debt and financing the whole thing over increasingly long terms at interest rates they arguably no longer deserve. The problem is that prime credit customers are slowly becoming credit criminals.

Let me tell another story. I’ll leave the name of the lending institution out of this one due to how recently this all happened. About a month ago a couple came in the store with a 2017 Pathfinder in fully-loaded Platinum trim. They had an $750 per month payment, and wanted to see if they could move to a cheaper vehicle to reduce that. We sat down to put everything together, I figured out they just bought the vehicle from us six months earlier. Their payoff exceeded $52k on their six month old Pathfinder that was realistically worth $37k.

They seemed very anxious to get out of the car; I figured it was the high payment that had them nervous. Once we had already assumed that they were at least $10k flipped we took a look at their credit information. That’s where we found out the real reason they were nervous: they were four months behind on their 84 month loan. I walked over to the customers to break the bad news that I wasn’t going to be able to save them from the inevitable. In the middle of my first sentence, the wife screamed, and we looked out the front glass to see their Pathfinder gliding away behind a repo man’s tow truck. I told my manager the situation. He told me to grab a service loaner and take them home as a courtesy.

I didn’t hesitate to break the silence on the somber drive back to their home. WE began to talk, and they quickly opened up about their situation. They both had 800+ FICO scores when they bought the car. They agreed that they bought more car than they needed after they dealer made them believe that a fully loaded Pathfinder was the smart way to get out of their 2015 Rogue in which they were $8k upside down. When I asked the husband why they did it, his response was disheartening: “Honestly we just wanted it. We knew the payment was too high when we had to go to 84 months to get it. But we just couldn’t stop ourselves.”

That’s the root of this whole fiasco. No one's stopping to think about what they're doing to themselves. Instead, people are walking into dealerships with the mindset that not one soul will keep them from being able to buy the car they want. Those same people are running into a desperate dealer staff that will stop at nothing to try and sell them a car, because they are under immense pressure from the manufacturer to move product. It just seems like everyone is asking: “Who’s going to stop me?” Who’s going to stop you from taking out a 96 month loan on a car you truly can't afford? Who’s going to stop the sales manager from shoving the monthly payment down your throat? Who’s going to stop approving loans for people that they simply cannot afford? Who’s going to stop the madness?

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