Rubbing the Crystal Ball, Here's a Look at the Future After Detroit's Show Ends

By Marc Stern

Marc Stern

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Market Change Predicted as Scrappage Outpaces Sales
There's an interesting prediction making the rounds right now that, if it is right, may mean the... Read More

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• The sky is falling

• The electric is coming

• The sky is falling

• New engine technologies are coming

• The sky is falling

• The hybrid is the king

• The sky is falling

• The Caddy's new styling is the way of the GM world

• The sky is falling

We could go on and on with what the pundits are saying about the future, but notice something about their prediction, there's always someone running around with his hands on the keyboard maybe they should take their keyboards away shouting the sky is falling or doom and gloom for the auto industry.

Well, here in our little insulated section of the automotive world, looking out at the nuthatches clamoring for food on the snow-covered ground and listening to the loud hoot of an old barn owl that kept us up most of the night, you might think that we're a bit parochial in our views, but, believe it or not we've kept in touch with old friends in the business, sold more than 800 cars in my career as a domestic and imported car salesman, and have watched the same trends on the Internet as anyone else, we actually have our own ideas of where the industry is headed.

• First and foremost, the year 2010 will likely mark the turnaround year for car sales in this market.

• BMW will have influence on other lines that's far broader than most people suspect

• Hybrids will still make up the majority of electric vehicles sold over the next few years

• Electric-only vehicles will become a greater part of the vehicle mix

• Fuel-cell technologies will make a stronger showing than you think

So, let's examine this punditry to see why we're making these claims. The first one, this year will mark the sales turnaround, comes from simple market knowledge. In 2006, we were actively involved not only in retail but also in online sales for major dealerships in and around Boston. We were also involved in auction-style sales in Ebay and we noticed a trend toward longer and longer leasing.

Until 2006, the average lease was three years, but that year we began to notice that leases were going to 48 months and, in some cases, 60 months. The reason, quite simply, was to keep the monthly cost of the vehicle as low as possible for the lessor, because the economy was just beginning to tank about then, even though there was a bubble of activity caused by the industry's discovery of third-level banks that were willing to give money at almost usurious fees to anyone who was breathing. This meant that even leases had to be kicked out another 12 months and those leases are now coming due and, unless the person really loves the vehicle, it's likely that there will be a resurgence in activity as people move from one lease to another.

In turn, this is going to put some higher-quality trade-ins out there in the used market and, while they may not be only two or three years old, they are still new enough that many people will like them and will try to get into them. They are also new enough that they can be financed at relatively good rates, so it is likely the used market could get a boost from this, too.

And, this will likely continue next year as 60-month leases come due. The value of those vehicles as trades, though, is a lot more suspect because they won't really be worth the amounts that dealers will have to charge simply because the lessor has already gotten the use and depreciation out of the vehicle while the factory has to remember the residual value which does drop about 7 or 8 percent per year.