SUV and Pickup Truck Buyers Now “Owners for Life”

[GRG55]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

There was a leaked Ford research paper on who buys SUVs.

Impotent or mostly powerless people looking to their automobile for an ego boost and to show some aggression.

That report apparently was one reason why SUVs with front grilles looking like teeth were introduced (the Edsel's grille would NOT appeal to this crowd, nudge, nudge, wink wink).

i don't know how that squares up with your suggested demographic - do a lot of those people feel powerless?



Not the one I read earlier, but another

http://www.washingtonmonthly.com/fea....mencimer.html

A small snippet
SUV buyers tend to be "insecure and vain. They are frequently nervous about their marriages and uncomfortable about parenthood. They often lack confidence in their driving skills. Above all, they are apt to be self-centered and self-absorbed,

LOL! . More journalist stereotyping disguised as "science". All those "soccer Moms" are "uncomfortable about parenthood"? Sure...

On the original topic of this thread, the latest from GM.

Just an observation, that while the Big Three US carmakers are getting dumped on pretty heavily right now, the much admired Japanese "Big Three" all poured tons of money into their full size pick-up truck programs (Toyota Tundra, Nissan Titan, Honda Ridgeline) at exactly the wrong moment in history.

GM Suspends Work on Future Trucks to Focus on Cars

By Jeff Green
June 19 (Bloomberg) -- General Motors Corp., reeling from record gasoline prices, has delayed plans to replace its fleet of large pickups and sport-utility vehicles and will focus on developing fuel-efficient cars.

Engineers who had been assigned to overhaul such models as the Chevrolet Tahoe SUV and Silverado pickup for 2012 are being transferred to other projects, Tom Pyden, a spokesman for Detroit-based GM, said late yesterday.

The shift is the second change this month in response to consumer demand for better mileage as gasoline tops $4 a gallon. Chief Executive Officer Rick Wagoner said June 3 he will close four factories that build large SUVs and pickups by 2010.

``This is hugely significant,'' said Rebecca Lindland, an analyst for Global Insight Inc. in Lexington, Massachusetts. ``This is a clear sign they are re-evaluating everything, because this has been the core of their bottom line for years.''

Other automakers are also feeling the pinch. Ford Motor Co.'s F-Series, which had outsold every car on the market monthly since 1992, was overtaken in May by four cars made by Honda Motor Co. and Toyota Motor Corp. Toyota this week said it's cutting U.S. production of Tundra pickups for the second time in four months...
http://www.bloomberg.com/apps/news?p...Q18&refer=home

A little vignette from the recession-to-come. Oil rich Alberta is the pick-up truck capital of Canada (25% of all pick-up sales in the country are in Alberta alone).

I travel through a booming commuter town near Calgary fairly frequently (when I am back in this neck of the woods) and noticed this week that for the first time in memory both the GM and Ford dealers have moved all their full size pick-ups to the back of the lot and replaced the front row with some sort of mini-SUV cross-over clone (GM dealer) and small pick-ups (Ford dealer across the highway). The GM dealer is advertising $500 "free" gas with any purchase.

I guess having lots of oil doesn't make you recession proof after all...:rolleyes:

[Guest]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

[quote=jacobdcoates;38444]I work in auto finance, that being said. A couple of points to clarify. Banks and semi-literate leasing companies have insurance on the residual value of the leased vehicles. When a contract is written on a lease vehicle the Residual Value(RV from now on) is calculated based on the ALG(Auto Leasing Guide). It is basically an educated guess on the probable value of the vehicle at a specified mileage some number of months in the future. Example msrp of 25k, 60 month lease = 33% RV of msrp(8K). Auto financing from the bank is pretty sedate, We don't like surprises and banks are not going to lose the shirts on RV's on trucks, SUV's or any other vehicle, 95% of the time. It is the RV insurance companies, after they bite the bullet one too many times, then after they fold the banks are on the hook for the neg equity of the vehicles turned in. Where banks will lose their shirts is in the repossessions of said vehicles, when the loan defaults.

I have to wonder if this is actually the case generally, at least as far as simply taking a claim to an insurer and getting fully indemnified. Why?

First, there's a thing called moral hazard. What incentive do lessors have to sell a vehicle at auction for top dollar if all they have to do is go to their insurer for the deficit amount? At the very least it seems the insurance would only kick in after they took a certain hit.

Second, Shifting the risk burden to an insurer means you're giving up a good slice of your profits. I'm wondering why insurers would be any better at forecasting residual value than lenders. All this is doing is transfering the risk from the lender to an insurer. It adds a level of cost that seems unneccesary for such large institutions on mundane items like cars. I can see insuring a nuclear reactor or some unique big ticket item, though.

Third, my wife works in leasing (much bigger ticket items, not cars, though) and actually sets residuals for a living as well as negotiating the disposal of items off lease. She says that they do insure some items and pay the premiums, but only because they want to sell the leases off and the buyers insist on it. But this happens after the origination of the leases and only when they decide to syndicate them, not routinely. But even then the agreements are written where the originating lender takes a nasty hit if their residuals were wrong. That therefore eliminates the moral hazard.

Fourth, I just read a news item in the last month about BMW taking a hit on lease-return vehicles, since they can't sell them for what they thought they could when the residuals were set on the vehicles when new. So at least some major players aren't insuring them, or are at best only being partially indemnified.

Fifth. People in the industry get FIRED routinely for not setting residuals properly. I can't see much effort being put into it if they can fall back on an insurance co to take the hit. I guess that could affect future premiums, though.

[jacobdcoates]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

That is why leased vehicle are sold at auction, theoretically it is top dollar/market price. The residual value insurance is only in effect if the vehicle is auctioned. Commercial leasing and Open ended vehicle leasing work differently. Which is what I suspect that you wife works in, of which I know almost nothing about. The banks don't get to set the residual value for the most part on retail vehicle leasing. Banks get the RV form the ALG(Auto Leasing Guide) which is put out by a independent company. Hence very little moral hazard from the bank or the insurance companies point of view. I should have been more specific about the type of vehicle leasing I was talking about, which is closed end vehicle leasing. Closed end vehicle leasing is ~99% of the vehicle leasing to the public.


BMW is getting burned by there leases, for a couple of reason one of them being that the residuals have gone down and if you shoe horn someone in to a vehicle at the max that they can afford it leaves little for maintenance and upkeep, which can really drive down RV fast. There is some pretty good hearsay evidence from a lot of dealers I know that the lower the credit score and higher DTI the worse maintained a vehicle is. There RV I would guess is through a subsidiary or they ,god forbid, self insured. While self insurance is not unheard of, very few do. I know my company had RV insurance for quite sometime, although they did decide to forgo RV insurance on future vehicle, which I thought was a horrible idea, but then again I don't get paid to make those decisions nor pay for them.

[jacobdcoates]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

Oh and by the way I said I work In auto Leasing. Fred being a bit of a sarcastic something labeled me an expert, I have NEVER claimed to be such, I just claim that I know how vehicle leasing works and Retail auto loans for that matter,because I do it Monday through Friday every week, month in and month out for a couple of years now. If you ever want a soul sucking job stare at Auto leasing/loan contracts all day.

[sadsack]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

Oh and by the way I said I work In auto Leasing. Fred being a bit of a sarcastic something labeled me an expert, I have NEVER claimed to be such, I just claim that I know how vehicle leasing works and Retail auto loans for that matter,because I do it Monday through Friday every week, month in and month out for a couple of years now. If you ever want a soul sucking job stare at Auto leasing/loan contracts all day.

Remember - iTulip is necessarily an argumentative forum (as per the Socratic tradition). Above all, "experience on the ground" is valued above all, including your input. And, I hope, the best-reasoned argument (as opposed to the best rhetorical argument) will ultimately win out (case in point, the periodic revisions of the iTulip core theses, along with acknowledgements of where the previous versionws were wrong or had failed).

Don't confuse penetrating comments with "rude" ad-hominem attacks. EJ is speaking from generalities - it is the specifics of your replies that ultimately may outweigh any iTulip bias against information from the auto "fleecing" industry in general.

There was an earlier thread that (IIRC) categorically rejected any type of auto financing (other than the 0% variety), so there is somewhat of an intrinsic skepticism with regard to the dealings in the auto industry.

I personally have found your posts informative - hopefully I speak for more than myself . . .

[FRED]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

Oh and by the way I said I work In auto Leasing. Fred being a bit of a sarcastic something labeled me an expert, I have NEVER claimed to be such, I just claim that I know how vehicle leasing works and Retail auto loans for that matter,because I do it Monday through Friday every week, month in and month out for a couple of years now. If you ever want a soul sucking job stare at Auto leasing/loan contracts all day.

First, you are respected here for the work you do. A lot of us have day jobs that are less than intellectually stimulating.

Second, your authentic, experience based opinions are deeply appreciated by all here.

Third, one word of authentic experience cancels a million words of falsehood from the FIRE Economy trade press. Pour it on.

[jacobdcoates]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

Sadack,

I appreciate were you all are coming from. Socratic method is a fairly good way to argue, better than most. I will admit that I misinterpreted Fred comments at the begin of his post, and that is a failing of mine. I don't consider myself an expert in much of anything, just someone who know a little bit about a lot of things. So, when I do hear someone call me an expert with exclamation points; to me it comes across as condescending or sarcasm direct towards me, not the subject at hand. A failing of my own(one of legions) that I have tried to correct although I have been less than successful. I think I have not quite picked up on the particulars social nuances involve in forum boards. Even though I have been reading ITullip for about 1 1/2 years now. Reading and posting are different things. I have done very little posting, mostly only on issue that I feel that I have something to say that is relevant or slightly humorous but germane to the topic.


In the strictest sense of financial prudence auto loan/leasing is near to the top of financial imprudence. Debt on a depreciating asset is..... well to put it bluntly foolish for a lot of reasons, most of them detailed in the earlier referenced thread on weather to finance a vehicle. But a lack of options for affordable transportation leads to almost no choices, Most cars cost between 50%-100% of the average yearly salary. The math doesn't work out for most people, because they can't fix their own cars these day, in order to drive them for 10yrs/150k miles at a reasonable cost. I will admit that I do finance my vehicles but I usually drive them till for at least 150k miles or until the rear main seal goes, like my last car.

You are so very correct when you refer to as the auto fleeing industry. In my opinion if GM, Ford and Chrysler wanted to really sock to to Toyota, Honda, etc- sell factory direct. That would turn the world upside down and in some cases more right side up.

Trust me when I say I very much agree with best reason argument should when out vs rhetorical one. I happen to also hold a degree in philosophy, don't ask how I ended up in the auto finance industry. I have no idea.:confused:. I for some reason fell in love with logic and spend 2 years studying philosophy. A very good logic book is "Natural Logic" by Neil Tennat, maybe out of print now but fairly easy to follow for symbolic logic. Kinda of pricey though used is $50.00 new is $225.00.


Sorry about the earlier tangent on logic.

Another point to clear up is if the vehicle sells from more or equal to the RV, The bank gets nothing from the RV insurance company. Other than a expensive smile.

[metalman]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

these forums are just like real life. 80% sits and watches, 10% raise their voice once in a while, 5% talk often, 5% never shut up. guess i'm in the latter category...

[Jim Nickerson]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

these forums are just like real life. 80% sits and watches, 10% raise their voice once in a while, 5% talk often, 5% never shut up. guess i'm in the latter category...

Yes, with these goddammed one-liners on every thread, I'd say I agree with you, metalman.

[metalman]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

Yes, with these goddammed one-liners on every thread, I'd say I agree with you, metalman.

good point. someone was complaining about the 10 character min limit on posts here or whatever it is. how about a 100 word min limit? er. this would not make it, alas...

[Jim Nickerson]

Re: SUV and Pickup Truck Buyers Now “Owners for Life”

good point. someone was complaining about the 10 character min limit on posts here or whatever it is. how about a 100 word min limit? er. this would not make it, alas...

All bullshit aside, if that can exist between you and me. metalman, I am fully convinced you a pretty smart guy--not that the majority of your posts within my level of comprehension lead me to that conclusion, but occasionally you put up some posts with what I consider to be real insights. Because you are still a "spook" here as far as I am concerned, I tend to discount for the most part what spooks post.

From what I know, if they have told the truth, which I grant they have, some of the smarter people (as I perceive them) here have conveyed to me in PM's their backgrounds, and some of the really top posters appear to be "self-educated" investors. I guess we all draw opinions about the individual behind certain posts, but to me it is nice and actually appropriate to be able to gain some information regarding how old people are, where they are, what they do for a living, their educational backgrounds and their interests. Knowing some of those things help me differentiate especially who the new posters are, and at times I believe offers some insights into their thinking.

A seeming lot of posters here throw out stuff about themselves in their posts, but never put diddle into their profiles--I don't know whether that is laziness or not knowing how to edit their profiles. Do you know how to edit your profile? If not ask FRED.

It seems, unless it was part of your commonly employed poor typing, that recently you indicated you live in NH. Is that true? or was it some sort of a typo? I had figured for no reason I can name you are in CA.

I appreciate some of your contributions and I continue to be amazed at your ability to keep up with things posted in the past.