Agreed. But, I expect there is something else going on as well. There is a pipeline that I'd guess contains several months of normal sales volume that is financed either by the manufacturers through financing subsidiaries such as GMAC or by bank "floor plan" loans (i.e., loans for showroom inventory). The lenders are trying to curtail this type of credit, thus forcing dealers to liquidate inventory, depressing prices, and leading to more of the same via a positive feedback process.
Peter Hollings -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Charles Brown Sent: Friday, January 02, 2009 11:32 AM To: [email protected] Subject: [Pen-l] query From: Gernot Koehler ---------------------------------------------------------------------------- ---- How could one explain that the breakdown in the car markets is as severe as it is? Hypothesis (a) cars behave like luxury goods? Hypothesis (b) banks and car dealers are more reluctant to give credit for car purchases? Hypothesis (c) the high gasoline prices of 2008 scared motorists? Hypothesis (d) consumers are postponing the purchase of a new car, adopting a wait-and-see attitude in response to the climate of financial uncertainty and are a bit more willing to drive an old clunker? Hypothesis (e) car manufacturers inflate their problems in order to get a maximum of public cash? Other? Gernot ^^^^^ My understanding is the extreme severity is primarily a combination, depending on market segments and local economic conditions, of (b) and, where credit is available, (d)... TS - This message has been scanned for malware by SurfControl plc. www.surfcontrol.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
