Plunging Oil Prices and New Car Sales

[FordBuyer]

So what do you guys think? My prediction for oil prices this Winter is that they drop down to $60/barrel if there is mild winter and $75/barrel if there is real cold, snowy winter like last year. What does that mean for car and truck sales if gas prices fall to around $2.50-$2.75/gallon? I'm sure we will get the traditional spike up of oil next spring as we always do, but with the economy so weak I doubt if gas will spike anywhere near $4 next summer. So it looks like very stable gas prices for quite awhile in future. Inflation outlook should improve nicely as the months pass and the credit markets should calm down significantly. So what will people buy next year?

 

My prdiction is that residuals on trucks will improve significantly, pickup truck sales will improve somewhat, Flex sales will look better, Edge sales will improve, Explorer sales will get better, and even Expedition sales will improve. There will still be a demand for modestly priced cars like Fusion and Focus, but Focus sales won't hit targets and third shift won't be needed. CAFE rules are not going away and Ford needs to keep on bringing out smaller vehicles, but market will shift again next year modestly towards bigger vehicles.

 

I think next year will be a better year for auto sales. I think it will be closer to 14 million units instead of possible 12 million as gas prices moderate significantly along with inflation and pent up demand pressures will only grow. The 2010 Mustang should do well as spring approaches with under $3 gas and better credit situation.

 

2010 should be much better year as Obama's tax cuts for the middle class take affect, gas prices stay stable, and pent up demand for cars and homes grow. The trick will be for Ford and GM to remain in business to take advantage of better economy and gas prices. There should be 15 million cars sold by 2010.

[silvrsvt]

I think your beening too optimistic here...the big issue is going to be the credit markets, where its going to get worse before it gets better, and I think people are seriously going to think twice about buying a SUV or Truck again, since they won't be able to get finacing on it. I think you won't see a full-turn around in the market till late next year or spring of 2010

[Catalepsy]

You can't really tell right now because there's a lot of fear that's not always based on facts. The truth will be in Dec during xmas sales. By then, we would have had a couple of months to evaluate things. If Wii, the latest $70 video game. or the i-pod-phone-whatever doesnt sell out, then we're probably headed to deeper waters.

 

The big ticket items will follow if the market see that consumers are spending money. No one can say for certain what is going to happen...only time will tell.

Edited October 6, 2008 by Catalepsy

[NickF1011]

2010 should be much better year as Obama's tax cuts for the middle class take affect,

 

[FordBuyer]

 

 

Hey, it's not about whether or not McCain has chance of winning anymore, it's about how much he will lose by and how many others he will take down with him with many predicting Senate being 60-40 in favor of Democrats. We better hope Obama can swing this eocmomy around, because if he doesn't, we will see recession like one never seen before and everyone will be living in their cars. Time to put country first and forget this petty political BS. The stakes are too big now. These aren't normal times or even normal recession.

[snooter]

..it goin be tuff...microsoft, intel and yahoo right now are "dead money".means you bought in 1998 you have not made dime on you money....

[NickF1011]

Hey, it's not about whether or not McCain has chance of winning anymore, it's about how much he will lose by and how many others he will take down with him with many predicting Senate being 60-40 in favor of Democrats. We better hope Obama can swing this eocmomy around, because if he doesn't, we will see recession like one never seen before and everyone will be living in their cars. Time to put country first and forget this petty political BS. The stakes are too big now. These aren't normal times or even normal recession.

 

I'm not saying that McCain has a shot of winning. I'm laughing that he actually thinks Obama's promises of "middle class tax relief" are ever going to materialize.

[jasonj80]

Oui Vey… this is so far off topic

 

 

 

The President is in the Executive Branch he/she doesn’t make laws. They enforce the laws that are set forth by the legislature. This is where Obama/McCain get mess up, and Palin got really messed up considering she has some Executive branch experience. When your over in the Senate or in the House you get to make the laws err, Legislate the laws as they are in the Legislative branch, the executive branch then gets to enforce those laws if they see fit, if not they can veto it.

 

Obama and McCain got to make the laws when they were in the Senate but if either gets elected they don’t get to do that anymore (If they did they would be George Bush) So really anything they say is really a bunch of crap as they can’t do any of it. People always want to blame the President or Governor for the failure of the state when in our system it is actually the Legislative branch that is what letting them down (currently that is everyone in Washington that belongs to a political party)

 

As for Obama winning – don’t appoint the cabinet before you have the office, I have no doubt he will win the popular vote, but those pesky 538 people who actually elect our President may see it different.

[ANTAUS]

Gas usually gets low around election time, then goes right back up. I think people are becoming less optimistic that the price of gas will go any lower than $3.25... It'll always go up...but seldomly go low. People have started to adjust to paying $3.50/$4gal and they aren't liking it...which in return, they are flocking to more fuel efficient vehicles if they can get the credit for it.

 

The next factor becomes, the credit market... How many will truely qualify for a car loan... Some car makers are going out of the lease business, and that'll cut quite a bit into their sales. For the next couple of years, people will just have to make do and pay off as much as they owe as possible. Bling bling will officially be over for many.

 

And as for the candidate that will inherit all this mess when getting elected, it'll be beyond their control to do much of anything. Sadly, they will fail with the overall picture.

 

I agree with Jasons assessment, it's the 538 people that appoint the President. I get a crack from seeing so many of these "polls" placing Obama ahead because mark my words, McCain will win...we still have too much ignorance in this country and we'll be faced with alot of "Billyjo's" living in the smallest of Kentucky counties that will determine the election...and when everything is said and done, behind the curtain...they will not vote for someone who's black. County by county, the math is not there for Obama to win in any way. Wow are so many people going to be dissapointed on that fact, but thats life....so the mess will continue, for another term.

 

But I'm enjoying the fact that years ago, I forecasted this financial mess and political chaos without the help of Miss Cleo

[SVT_MAN]

But I'm enjoying the fact that years ago, I forecasted this financial mess and political chaos without the help of Miss Cleo

 

Interestingly, my first year of university in my Macro-econ class, we were discussing America's reliance on credit. A number of us actually predicted in our papers that our reliance of credit was like a poorly-stacked deck of cards, waiting to tumble and crush our economy. Now, 3 years later, it sure seems to be true.

 

My professor held the same opinion. That's the sad part. So many people had predicted this to happen, but until it did - nobody did anything.

 

Whoever gets elected to the position of President is going to have a very full plate. I don't have confidence in either candidate. Much the same as the 2000 election. A choice between the lesser of evils.

 

Bush has done a poor job in office, but let's be honest: he has had a tough climate to work in. I don't agree with everything he has done, but not EVERYTHING he did was wrong. Just a lot. I realize this is akin to saying that you didn't get all problems wrong on a math test you didn't study for. But, this isn't the 1990s, folks .. the past 8 years have been tough going - and they would have been for any president.

Edited October 7, 2008 by SVT_MAN

[Edstock]

but not EVERYTHING he did was wrong. Just a lot.

Surely you jest!

[focus05]

Surely something good has come from the $4 trillion in extra debt we've taken on in the last 8 years. Oh wait...

 

I'm sorry I ever voted for him in 2000. Bush has done more to turn me into a bleeding-heart liberal than the Democratic party ever could.

[V8 Ford]

2010 should be much better year as Obama's tax cuts for the middle class take affect

Unfortunately, the net changes to income tax are positive, and coincide with large increases in corporate taxes and capital gains tax. Add the promise to run an even budget, and there's nothing in the way of fiscal stabilization policy in his economic plan. There's not much in the way of fiscal stabilization policy in McCain's plan either, but that's to be expected as Republicans don't tend to favor that sort of action.

 

Of course, this is just what they say, and if you add sizeable deficit spending, Obama's economic policies make a lot more sense.

 

Interestingly, my first year of university in my Macro-econ class, we were discussing America's reliance on credit. A number of us actually predicted in our papers that our reliance of credit was like a poorly-stacked deck of cards, waiting to tumble and crush our economy. Now, 3 years later, it sure seems to be true.

It's rather unfair to single out the US for this; every nation relies of money multiplication to a large extent (maybe not to the extent that the US does, but its still very important and there would be large economic consequences if something like this happened). The cyclical nature of an economy is based of bad luck and bad decisions (I don't buy Keyne's animal spirit's theory). What happened this time was the bad luck and bad decisions affected the credit sector and, because of the nature of credit, it had exponential effects. The bail out will help ameliorate the effects; hopefully it doesn't reinforce the bad decisions that led to this.

[jhgraves5767]

I know I am in the minority in this current environment, but I took bought a 2009 Fusion SEL V6 in September because I loved the test drive. It was smooth and fun. I chose this Fusion because I was trying to balance/satisfy my need for safety (ESC, reverse sensing which has already saved me once, good acceleration when necessary, 4-wheel disc brakes & ABS), sufficient room to feel comfortable while driving, some extra features that are just plain fun (ambient lighting that I just can't believe that I like so well at my age, leather heated front seats, moon roof, the incredible SYNC, remote start), reliability, along with adequate gas mileage that won't bankrupt me. I test drove quite a few cars including the Focus, Taurus, the 4-cyl Fusion, and the V6 Fusion. I leaned toward Ford because the local dealership took such good care of my Focus ZX-3. Of the cars I test drove, I just had the most fun driving the V6 Fusion so I ordered one. I am going to drive this car for the next 7 years or so and didn't want to regret every day I started the engine that it was going to be another boring drive to work. I won't regret anything because the V6 Fusion SEL is fun, really good-looking with its brilliant silver paint and 2-tone stone leather interior, has plenty of acceleration when merging onto the expressway, and is giving me good-enough mileage in the low 20s. When car buyers get over their low gas mileage fetish and consider a more well-rounded view of their needs during their commute (safety, comfort, fun), I think they'll be back in the dealerships buying more fully-featured cars. If not, I'll be the happiest person pulling into the parking lot each morning I go to work.

[elkarlo]

We might get a spike of SUVs and Trucks at the end of the year . The tax break vehicles =) Other than that I just see the economy ruining the rest of the year, easily.

[ANTAUS]

Oh yeah the "Hummer" tax credit for vehicles over 6000lbs. What they fail to mention is that when business goes bad, and you must turn in that vehicle, you have "recapture" you must pay upon the depreciation that you took off on it.

 

Next wave you will see with all these foreclosures is that people who are being foreclosed on, are not being told that the loss the bank made on the property, they'll be paying for, for years to come... come tax time

[armadamaster]

I'm sorry I ever voted for him in 2000. Bush has done more to turn me into a bleeding-heart liberal than the Democratic party ever could.

 

Which is comical in and of itself since some would argue that Bush has operated the White House like a bleeding heart liberal.

[Noah Harbinger]

Next wave you will see with all these foreclosures is that people who are being foreclosed on, are not being told that the loss the bank made on the property, they'll be paying for, for years to come... come tax time

 

1) You're only taxed on the amount the bank reduces your mortgage by, if they decide to do that instead of foreclose

2) An exception was passed so that it is not taxable for mortgages and renegotiations that occur within a certain time frame

 

edit: 3) If you're referring to the fed's purchase of the toxic waste debt held by banks... they're going to be buying those assets at their already devalued prices; at worst, assuming Paulson is worth the money he's printed on, we'll break even on that stuff, when the housing market eventually (5 years?) starts to go back up.

Edited October 7, 2008 by Noah Harbinger

[351cid]

Seems to me that the economy started tanking with the turn over to Pelosi & Co.

[2005Explorer]

Seems to me that the economy started tanking with the turn over to Pelosi & Co.

 

It was heading in the wrong direction before the Democrats took over. This is something that has been brewing for years.

[Edstock]

It was heading in the wrong direction before the Democrats took over. This is something that has been brewing for years.

Decades, even, starting in the late 60's.

 

If blame is to be affixed to anything, blame computers. Why?

 

50 years ago, if you had a savings account, you got interest payments twice a year. This was a real challenge for the accounting department. Similarly for mortagages, setting up an amortization schedule was something that required some effort, and "flipping" properties was done by very few people. Today, it's just a couple of mouse-clicks.

 

So, the process begins, and grows. Markets get networked together, world-wide.

 

Then some wizard thought up derivatives. http://en.wikipedia.org/wiki/Derivative_(finance)

 

Here, there be dragons. Then, all it took was absence of government regulation.

 

Not really different from the tulip speculators of Holland, 350 years ago.

[FordBuyer]

Decades, even, starting in the late 60's.

 

If blame is to be affixed to anything, blame computers. Why?

 

50 years ago, if you had a savings account, you got interest payments twice a year. This was a real challenge for the accounting department. Similarly for mortagages, setting up an amortization schedule was something that required some effort, and "flipping" properties was done by very few people. Today, it's just a couple of mouse-clicks.

 

So, the process begins, and grows. Markets get networked together, world-wide.

 

Then some wizard thought up derivatives. http://en.wikipedia.org/wiki/Derivative_(finance)

 

Here, there be dragons. Then, all it took was absence of government regulation.

 

Not really different from the tulip speculators of Holland, 350 years ago.

 

 

Good point. You also have millions of investors sitting in front of computer buying and selling stock all day. Many are called day traders as they play position up and down and buy and sell the same stock many times in a day. That has probably contributed to the volatility of the stock market which has turned the market into a Crap table or some other kind of casino game. The internet is the new Wild West with no Sheriff in sight most of the time.

[jpd80]

But that's also a world away from lending institutions disobeying their own corporate guidelines.

Mortgages have been going south badly since 2005 and the "Sheriff' sat on his hands and

continuously indicated all was well until a couple of weeks ago when all was not well.

 

Inept regulators asleep at the switch for over three years and now the American people pay the price.

[Biker16]

there are a few variables. both favor a Cap and Trade CO2 system. that could raise billions of dollars, if Gas begins to fall below a certain amount I would raise the GAs tax, to discourage a return to the 90s, and more importantly to provide some predictability for Automakers and buyers.

 

you could use a thiis new revenue to balance the budget and begin to pay for the sins of the last 8 years.

[bb62]

There is nothing wrong with computers, day traders, or the 90s. The problem in our economy stems from Carter era regulations forcing banks to loan to low income people so they can buy homes. In retrospect this is remarkably stupid (as most things from the Carter administration were) as it created the era of low or no downpayments on homes for the riskiest people. Much of this risk was masked by rising home prices and tapped out personal financing (credit cards). In California, home prices rose well beyond the region's incomes, yet people had unrealistic long-term expectations that added fuel to the fire. How can a region having little or no income growth expect to pay larger and larger portions of their paychecks on mortgages. This is where the government should have stepped in and where they should step in now.

 

My proposals - you want to buy a home - 20% down - nothing less otherwise there is no incentive to do everything possible to stay there. And even a 20% reduction in home values won't make you go upside down. Second - all mortgages based on a % of the largest income earner in the house. Too many growing families base their mortgage on both their incomes and more often than not, someone can be out of work for a time (especially in down economies where unemployment can happen to many).

 

As for banks, all banks need to understand the risk profiles of their investments. Buying these mortgage backed securities without understanding who the securities depend upon is madness. So I propose that all bundled securities require traceability to the loan originator - meaning you need to know whether the mortgage security is from a millionaire who is nearly finished paying mortgage off or a low income family that is strubbling to make payments. The same is required to corporate debt; private debt should be no different.

 

The last thing I want to comment on is the general culture of the nation. Instead of bashing Bush (who has made many mistakes) or somehow thinking that his actions could drive you to vote for the leftists. Consider that it is the whole leftist 60s "equality" philosophy that has driven people to view themselves as no different than anyone more wealthy than themselves and thus driving unafforable spending. The founders viewed equality in terms of ability to improve one's personal situation - not on equality of outcomes. It is that view of equality of outcomes that has early education focused on children's games with no winners (don't want to hurt anyones self esteem) to government preventing anyone from losing - thus driving massive financial debt and risk into the curture to keep up those appearances.