Edmunds' Caldwell: Automakers Using Attractive Financing(Audio)

show consumers tapped into savings to increase their spending. Last month, oil has erased a gain, deepening of bear market. We check the markets every fiftwo minutes throughout the trading day on Bloomberg Radio. Down Industrial averages down one d twenty three points two thirds of a percent, trading at eighteen thousand, two hundred eighty one. SMP five foundered down eighteen points eight tens of a percent at twenty one fifty three. Then AzaC is down fifty five points, a loss of

one point one percent, trading at fifty eight. West Texas Intermedia Crude oil down seventy four cents a barrel, one eight percent to thirty nine thirty one, spot gold up twelve dollar seventy ounced a thirty thirty and that ten year treasury down four thirty seconds with the yield of one point fifty three one. That's a Bloomberg Market minute. You're listening to Taking Stock with Kathleen Hayes and Pox on Bloomberg Radio. Can in the U s consumer keep

driving US economy forward? It's just one of the questions we asked today. As we say that most of the big US automakers reported light vehicle sales last month the trailed analysts estimates in July. It reinforced concerns the market for cars may have peaked with last year's record deliveries. So do the auto makers the auto sellers have to offer bigger and deeper incentives. Joining us now is Jessica Caldwell, executive director of industry Analysis for Edmunds dot com, and

she's joining us from Santa Monica, California. Jessica, welcome back to the show. Yes, hi, thank you for having me. Great to have you. First of all, characterize the trend we saw last month in terms of the sales a little bit weaker, but you know, compared to work with

a couple of years ago, the level still look pretty decent. Yeah, I mean, okay, so straight off the press, it looks like the latest calculation is going to show an increase from last July, not only in total volume but also instar So considering how strong last July was, I think this is good news. I mean, we heard some kind of negative news this morning from GM and four those you know, big automakers, that a lot of smaller automakers did well. Those that's kind of being lost in the story.

Some of the luxury brands suber Volto I can actually do better than we thought they would. Um, So kind of a mixed bag, I would say for auto cells, but perhaps a little better than some of the headlines

out there suggesting. Jessica and why if you could comment about automobile loans, because for the largest auto lenders, Ally Financial, Wells, far Ago, JP, Morgan Chase, and Capital One Financial on their quarter of the on their second quarter conference calls, they said that they used that the price have used automobiles are at risk of falling and uh if used car prices fall, the amount of the unpaid balance that

the lenders can recoup is also at risk of declining. Well, I mean, I think for used autos, I mean I think they're probably talking a little bit about some of a glut of leash returns. I mean, we see a big concentration in newer used vehicles. That means they're more expensive, they're kind of harder to find homes usually cheaper uh used cars which are older. It's so quicker. So I think there is some trepidation about how high, how how high the leasing has got because all those cars eventually

end up on the used car market. So a lot of concerns in the area right now. So the obvious sales actually if you look at across the board are coming in um as you say, if they're stronger than last line, that's that's pretty dang good. So is this is a problem for GM and four IT and with So what is their problem? Well, I mean I think that if you look at g M cells retail, they did actually quite well. They were up about five percent.

I think they had said they continue to reduce the number of daily rentals, which is a less profitable business. I mean, so right now, I think you know they're writing high on on they're selling large trucks, the Silverados, the tahoes. Those are profitable vehicles, and when you're selling more profitable legals, it's not always just a volume game, or not just trying to chase the volume. I think for Ford, cars have been kind of an issue for them. They you know, they came out with a lot of cars,

everything from the Fiesta to the Tours. They put a lot of money in that cars are not selling. People are buying pickups and stvs right now, So that kind of plagues Forward because their truck is doing, you know, fairly well. Their vans actually, all vans are doing, are doing really good. But I think that's you know, kind

of where Ford having an issue at this point. Jessica, I want to follow up on something you just said about leases, because I understand that the number of automobiles that are expected to come off lease this year, uh eight hundred thousand more than they were last year, Right,

that's the biggest jump in fifteen years. Are automobile companies making enough money on the automobiles they said, uh, um, you know, it's gonna be tough I think for these lease returns, and right now what they're trying to do is figure out a way to keep leasing going because consumers like leasing, and especially millennials, millennials at least more than any other age group. UM, and that's the upcoming market.

So I think by trying to do things like lower lease allotment miles UM do US leasing, that's going to become a thing pretty soon. Try to really equip these cars with the best features so in three cars when they come back off of lease, they're not going to be you know, out of date and people don't want them. So autom because we're trying to move these lovers to help residual values, which in turn are going to help keep the low monthly lease payments low and make these

cars attractive when they come off of lease. And and you know, don't just ruin the entire US car market. You know, our our auto team out in Southfield, Michigan, Detroit, Motor City, UH note in their story today that affordability has become the biggest impediment to buying a new car, according to survey by Auto Trader, with the average new vehicle price up to and after sent over last year

to thirty or four thousand dollars and change. Does this put all the more pressure then on the automakers to make again to to to step up the incentives again to get people a price and discount that way, It certainly does that people are choosing to buy vehicles that have more technology in them, more equipment, more content. People are choosing to buy larger vehicles. Um And that's kind of reason why I don't think auto cells necessarily a peak,

just because transaction prices are higher. People are wanting larger cars, and when you kind of hit a peak, you see people kind of go more downstream. So I think there is pressure on incentives. But if you're making more money selling larger trucks and SUVs, there's more profit margin, so then you can offer more incentives. And also leasing is another way you can get the prices to be a bit lower for people to make them affordable. But people right now there they want to expect with cars, and

that's the interesting thing that's happening, Jessica. Just quickly, by the end of the year, we're gonna be at that seventeen seventeen and a half million run rate for vehicles sales. I mean, it looks like the second half is usually big for automakers. Right now, I mean, you have the end of summer sales you have Labor Day, and then you have the big Black Friday end of the year, which never was as big as it is has been the past few years. So the second half is generally

stronger than the first. So we could, you know what, with July fells beyond record case. Thanks very much for spending time with us. Jessica Caldwell is executive director of industry Analysis for Edmonds dot Com, joining us from Santa Monica, California, taking a look at the US auto industry on a day when Ford GM post declines in sales for the month of July and Fiat christ their posts a small increase.

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