GM Blues, Sergio Walks the Line, 97-Month Loans

In the 1970’s tear-jerker movie “Love Story” starring Ryan O’Neal and Ali McGraw, the title song began with: “Where do I begin to tell the story of…?”

Well, that’s exactly how I feel as I begin to write about some incredible things that are happening in our industry.

Let’s begin with General Motors. A line from “Love Story” goes: “Love is never having to say you’re sorry.” Well, GM is sorry, as it faces recall after recall.  

It just announced the recall of 511,000 Camaros. That’s on top of all the other vehicles. Poor CEO Mary Barra. She’s a competent and qualified leader who inherited an awful mess.

Tightrope Walker Sergio

Fiat Chrysler Automobiles CEO Sergio Marchionne is raising another $8 billion to re-launch Alfa Romeo in the U.S. after that faltering brand has staggered and stumbled for decades bleeding money out of every artery.

He’s got high hopes of successfully re-introducing Alfa through 80 franchised dealers. There’s no room or margin for another screw-up. Sergio has those electric paddles charged up and he’s going to make one last attempt to shock. “CLEAR”.

The market may have forgotten and forgiven the fact that Alfa Romeo was figuratively run out of the country several decades ago because of poor quality and perpetual repairs.

Now, Sergio wants to take Jeep international, while at the same time, propping up Maserati and Alfa sales.

He’s a man walking a tightrope across the Grand Canyon on a windy day. At any moment you expect to see him fall, but he always seems to regain his balance after a number of contortions.

I love this guy. He’s a total enigma and he seems to pull off some wins when all odds say he’ll fall.

Do as We Say, Not as We Do

That might conceivably be the new motto of the Consumer Financial Protection Bureau. It’s ironic that the agency itself is under investigation by the House Financial Services Committee for, get this, racial and gender discrimination.

When I first read about it, I spewed coffee out of my nose. It seems a number of whistle blowers have come forward claiming that the anti-discrimination agency not only discriminated against them, but retaliated against them for coming forward and tried to suppress their testimony. 

Now, let’s be fair. I have a personal bias against the CFPB. I think it’s an overbearing, over-reaching authority. It has a jihad agenda against lenders and particularly one associated with the auto-retailing industry. It unfairly characterizes our business practices as discriminating, when in fact I know the alleged discrimination is non-existent. 

That’s what cracks me up here. I’m not saying that the charges against the agency or the top-management officials in the agency are justified or not.

I don’t know. That’s not the issue. What is funny is the CFPB is getting a taste of its own medicine. It has to jump through the same hoops and over the hurdles and defend themselves against these accusations. It’s exactly the ordeal it’s unfairly putting our industry through.

I am enjoying its pain.

97 Months And Counting

Retail automobile finance is running wild.

An ad offers consumers 97-month financing on new or late-model cars. The loans are for $50,000 or more. 

That’s insane. Especially considering the fact that the average transaction price on a new vehicle has crept up north of $31,000.00 this year. I’ll guess cars selling for $50,000.00 or more are probably 25% of the market.

The average auto loan today is between 65 and 67 months, with 25% of all loans approaching 84 months.

Ninety seven months? Excuse me. That’s more than eight years married to a car. As Santander, Cap One and other lenders are increasingly targeting the super-prime, non-lease, lesser-risk customer, we’ve not seen the end of outrageously extended terms on auto loans.

Hang on Maude; we’re going to the moon!

The average car on the road in operation today is more than 11years old, that’s up from 7.5 years through the 1980s and 1990s. 

The only outcome I can predict is when all of these situations come together and these stars align with Aquarius, the market will reach a saturation point.

Eventually sales will stall or slow dramatically. There are only 200 million or so licensed drivers, and Millennials are not showing any signs of moving out of Mom’s basement and stepping up to fill the void. 

If a 60-month loan is upside down for nearly five years, what are the stats on these super-extended terms loans of 97 months?

Oh well, only two snifters of Remy-Martin Cognac and I’m done. So until next time, keep those comments, emails and phone calls coming.

Jim Ziegler president of Ziegler Supersystems based in metro Atlanta, is a trainer, commentator and public speaker on dealership issues. He can be reached at [email protected]. WardsAuto readers also may comment on this article by logging in or registering below.