This Week in Car Buying: Inventories rise; Subaru Crosstrek to go plug-in; Ford car owners to look elsewhere; Borrowers default on subprime loans
Ahead of the big Memorial Day Weekend and its attendant holiday sales events, manufacturers are letting their inventories grow a little fatter in anticipation of the retail push. Also, a sluggish April also had a hand in the growing stocks of vehicles. Still the 73-day inventory on hand May 1 was slightly less the than the year ago level of 76, but also four days’ worth more than at the beginning of April. Days’ supply represents the number of days it would take to sell all cars in stock at current sales rates.
Automotive News says that more that 4.1 million vehicles are in the pipeline and represents the fourth straight month that stocks have grown. Also, the split by vehicle type mirror consumer preference for trucks over traditional cars. The trade paper said that 69 percent of the vehicles on hand were the former, versus 31 percent the latter.
Subaru reclaimed the top spot among makes with tightest inventories at 44 days’ supply, followed by BMW and Mercedes-Benz, both with 46 days, Hyundai-Kia with 56 and Mazda with 63. An inventory of 60 days’ supply is considered ideal. Makes with the largest inventories included Mitsubishi at 119 days’ supply, followed by Nissan and Jaguar Land Rover with 88 each, Ford at 86 days and Fiat Chrysler Automobiles at 79 days.
Last week, it was reported that Cadillac was cancelling the ATS sedan after 2018. There’s not many on lots, about 2,000, which translates to a tight supply of just 42 days. On the other hand, Ford, which halted Focus production in the U.S. and will drop all models except a wagon-like variant, has ample numbers of the compact, some 72,300 on the ground for a 135 days’ supply. Honda is still trying to rev up sales of its all-new 2018 Accord, but it’s reported that there are 102,000 in the pipeline for a 113 days’ supply. The CR-V, on the other hand, is a hot seller with just a 56-day inventory. And if you’re looking to buy a convertible for the summer driving season, check out the 2018 Buick Cascada of which the GM division has a 206-day supply.
Subaru Crosstrek to go plug-in
Subaru is jumping onto the electrification bandwagon by announcing its first plug-in hybrid in the form of the 2019 Subaru Crosstrek Hybrid. As part of its cooperative agreements with Toyota, Subaru (which also builds the Toyota 86 variant of the BRZ) will use the Toyota Hybrid System, mating it to the Crosstrek’s flat-four engine. The plug-in hybrid can be driven in pure electric mode or as a conventional hybrid vehicle when that EV range is depleted. However, Subaru did not give details on the plug-in system or estimates of the pure EV range.
Subaru says it plans to launch the 2019 Crosstrek Hybrid near the end of the year and that it will have styling unique to the model to differentiate from the standard versions. The new Subaru Global Platform underpinning the Crosstrek was specifically designed to accommodate hybrid and electric powertrains, according to the company.
Ford car owners to look elsewhere
In the wake of Ford’s announcement to essentially get out of the traditional sedan market by axing the Taurus, Fusion and all models of the Focus except for the earlier mentioned wagon variant, a Kelley Blue Book survey reveals that many current car owners may shop elsewhere for their next vehicle. Half the respondents said they would shop for a new or used vehicle from another make, while 30 percent they would shop for a new or used Ford vehicle, including crossovers, SUVs, trucks and the Mustang.
All the survey respondents said they were surprised by the announcement, with upwards of 60 percent saying they were caught off-guard. Naturally, more than half the Ford car owners thought the idea of getting out of the car market was a terrible idea. Non-Ford owners weren’t that far behind with about half thinking it was a bad idea. Only 20-percent of car owners both non-Ford and Ford alike thought it was a good idea, while truck and crossover owners were warmer to the idea. In fact, well over 30 percent of those who own Fords that aren’t cars thought it was a good move. Still, a plurality of both Ford car and non-car owners didn’t feel it would be a risky buy in purchasing sedans that are slated to be phased out. The study also found that Ford, above all other makes, is more associated with trucks than it is with cars.
Borrowers default on subprime loans
While earlier indications showed that automotive subprime loans were not seeing unusual delinquency rates, a recent uptick in that measure has caused some lenders to tighten credit requirements and not offer loans to those with poor credit ratings.
According to Fitch Ratings, the subprime delinquency rate for 60-day past due payments has reached 5.8 percent of all subprime loans, the highest it’s been since 1996. During the 2008 fiscal crisis, the delinquency rate was 5 percent. Subprime lending typically is at higher rates to borrowers with poor credit ratings.
Equifax also reports that the number of leases and loans issued to subprime borrowers has dropped by 10 percent year-over-year last January, and that lease originations decreased by 13.5 percent. However, financial experts don’t expect the increase in delinquencies or defaults to trigger a fallout to the larger credit market. The overall percentage of these loans that comprise asset-backed securities is still quite small. Plus, the pull-back in making these loans to subprime borrowers is expected to trim the delinquency rate in the future.
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