Big 3 Bullish on Selling Used Cars to Raise Profits
DaimlerChrysler, General Motors Corp. and Ford Motor Co. are trying to collect more for repossessed and returned-from-lease autos because U.S. automakers' profit margins are shrinking because of no-interest loans and other discounts, according to Bloomberg News.
Ford and GM increased loan loss reserves for this year by $1 billion because of lower car-resale revenue, Bloomberg News said. Selling cars returned by rental companies for less than automakers expected contributed to a $1.1 billion second-quarter loss for DaimlerChrysler's U.S. unit, Bloomberg News reported.
U.S. automakers have themselves to blame. according to Bloomberg News: the companies are
lowering resale values by discounting new cars to try to boost sales. GM, Ford and Chrysler discounts rose 34 percent to $4,258 per vehicle on average in the first nine months of this year from $3,166 in 2001, CNW Marketing/Research said.
At the same time, Toyota Motor Co., Honda
Motor Co. and Nissan Motor Co. incentives climbed 11 percent to $1,833 from $1,648, Bloomberg News reported.
GM, Ford, and Chrysler are going to greater lengths than their Asian rivals to curtail used-car losses because U.S. car models retain less value over time. U.S. automakers' models fetch about 39 percent of their original price after one year, less than the 50 percent for a Honda and 47 percent for non-U.S. vehicles, according to Automotive Lease Guide (ALG), which estimates values of used cars returned
after leases.
"More Honda and Toyota dealers are willing to keep vehicles that are coming back off lease to sell themselves," said CNW President Art Spinella.
Like DaimlerChrysler, GM and Ford are moving
autos around the United States and offering enticements for used cars, such as extended warranties, according to Bloomberg News.
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