No help or wrong help for Detroit?

They are not "ending up 'upside down'". They are **starting off**
upside down. Given identical beginning circumstances, the length of
the loan only determines how long it will be before the borrower isn't
upside down.

If a person doesn't want to ever be upside down on a trade value basis
then he must

1) have a down payment, in cash or trade equity, equal to the sum of
the sales tax and fees, dealer gross profit, and "drive off the lot"
depreciation from invoice cost,

2) have a payment high enough so that the principle covers the highest
monthly depreciation during the term of the loan.

Consider these factors, and you'll see the main one is the initial
downpayment, not the length of the loan. Under your scenario, we'd
have to assume a seven year old car had zero value, and that hasn't
been the case since they stopped selling Yugos.

The length of the loan is determined by the lender, not the dealer.
The dealer is merely the agent of the financial transaction.

What bites the buyer is the low original down payment. Its catch up
from there. The length of the loan only determines how long it will
take to catch up.

Actually not. Its the lack of downpayment that puts people in a hole.

Now, did you comply with my formula last time you bought a car? Which
on a $20,000 list price car requjires about $6,000 down payment plus
taxes and fees, cash incentives not counting? I doubt it. Hardly
anyone does. Being buried is merely a matter of degree.

 

It may be nuts but its true. Its been true for at least 20 years.

If you've paid in the past, why not? If you're not getting this kind
of treatment, perhaps you're not paying very well.

Already posted a link to Capital One.

You're an expert in auto financing in the same way Consumer's Reports
is an expert on anything.

 

Why weren't these so-called good buys available when those corps were making the BIG BUCKS?
Now that they're about to fold, things are different? Sounds like a 'real good deal' !

 

I am a staunch defender of American products and American trade.
However, the reason is that America has historically been (and
continues to be) a world leader in industry and technological
innovation.

Unfortunately, American car manufacturers have, for the most part,
fallen out of the later category. U.S. car manufacturers have engaged
in significant marketing and salesmanship to sell their cars for as
long as I can remember, and that is not a bad thing in and of itself.
However, they have turned their backs on a number of key factors
required to retain leadership in their industry - and I am not hearing
(or seeing) what I believe to be necessary for the Big Three to
succeed.

Most people have a tendency to follow good advertising, and good
advertising can initially get customers in your door. it can also keep
a number of customers around for a long time. It cannot however,
sustain a commanding marketshare in today's marketplace when it comes
to global competition. And General Motors is about to find that out.

The person who wrote what I am responding to mentions Yugo as an
example of successful marketing expertise. Where is Yugo today? They
had a brief entry into world competition that was first aided by a
terrific price, and second, by strong marketing. Neither of those two
advantages could save it from what was it's ultimate downfall - poor
quality. KIA from Korea recently found that out. Great price, but no
quality. Their counterpart in Korea, Hyundai, came in and readily
established themselves in a short period of time on both price and
quality. They are now (arguably) considered to be a potential
legitimate competitior to Honda one day. And, as a sidenote, they
recently purchased KIA (perhaps thru bankruptcy - I don't know) and are
hard at work on improving both KIA's quality, reliablilty and
reputation. (the order of those three items is not coincidental)

Historically, the big three in Detroit were initially unaware of the
significance of the Japanese car invasion in the 60's and 70's. Japan
brought their products into this country, undermarketed, undersold, and
at least initially even under-engineered in a few areas (rust
prevention being the primary) Around the early to mid-80's Honda had
learned enough lessons about American consumers and their vehicle
operating environments ------- and American consumers had learned
enough about Honda products, that Honda sales became embedded in the
U.S. marketplace. Honda believed the reverse of what the Big Three
managment believed (and many still believe today) that the key to
survival is good product and satisfied customers.

I used to buy only American vehicles, not because I am American, but
because the Big Three put out some of the best, and most exciting
products on the planet. That started to come to an end in the late
1970's when I found both myself, and some of my best friends, were
getting substandard products from Big Three at premium prices. - The
premium prices did not disuade me, only the substandard products. I
have bought only two American made vehicles since that time, and both
were in my opinion, excellent buys. BUT THEY WERE THE EXCEPTION TO MOST
BIG THREE PRODUCTS DURING THE LAST TWO DECADES.

It both dismays me and concerns me that some Americans still spend more
time discussing marketing and government support for the Big Three as
one of our major strategies while our automotive industry is
disintegrating before our eyes. After years of watching the
machinations of Detroit trying to sell (for the most part) inferior
vehicles usiing new designs and marketing hype, I went looking for hard
data to support my opinions of American car products. There was so much
data avalable in hardcopy and over the internet that I had a hard time
digesting it all - until I limited the way I was looking at the issue.

For any of you who care to hear the data, here are the stat's I came up
with in 2004:

I decided to limit my analysis to five seperate car companies: Detroits
Big Three, Honda and Toyota to simplify results. (Honda and Toyota were
considered to be the two best manufacturers of vehicles at the time
with a marketshare significant enough to impact the American market)

As of 1988, using vehicle reliability as key factor, both Ford and GM
were ranked at approx 40% / percentile in consumer ratings, Chrysler at
approx. 20% / percentile and both Honda and Toyota somewhere above 95%
/ percentile.

In the 15 suceeding years, trendlines were as follows:

Both Ford and Chysler improved by 20% / percentile (Ford from 40 to 60,
and Chrysler from 20 to 40) GM dropped from 40% / percentile to 20.

Over the same 15 year period, both Honda and Toyota improved from
approx. 95% / percentile to 98% (and above depending on individual
yrs)

A recent article in either Road and Track or Consumer Reports surveyed
quality of the best foreign imports and noted that previous "constant
improvements" in the best imports has almost ceased. That initially was
actually a relief to me - until I read why. It is the opinion of the
editors that quality of the best foreign imports has now reached the
point that continued improvements are getting to be almost unattainable
without signicantly higher costs. And more importantly, the best
imports are so close to zero defects, that further improvement does not
appear necessary.

In the coming months and years, I hope to hear more about how we, as
Americans, can improve the quality of our products (where necessary)
and less about how we can market our way out of this predicament. Our
faith, and our hubris, in our marketing genious is at least partically
responsible for getting us into this mess. And the next 5 - 10 years
promises to be FAR more competitive for the U.S. than the last 15
years.

Hope to meet you all at the finish line when the race is won. - And may
the BEST man win.

 

Stocks aren't like loans at all. With a loan you expect to get back
your capital as well as interest. Neither is at all assured with stocks.

Matt

 

No, stock isn't a loan; it never has to be repaid.

 

WHAT? Is that what they are teaching in economics 101 today? No wonder
the kids talk so stupid When a shareholder buys stock they're buying a
share of the corporation. One can not deduct or depreciate the cost of the
stock they buy from their taxable income. Even if one could deprecate the
cost of the stock they buy, one would only save the tax on the value, not
the value. Even if one had a total capital loss they save only the tax on
the value, not the value. In the meantime
a stockholder has to pay tax on the dividends from corporate income that was
already taxable to the corporation.


mike hunt

 

Being in the middle of a civil war didn't help either.

 

Apparently this is no longer so, as Toyota has enjoyed much success
with Lexus and now with Scion also.

The difference is there product is good. They are adding new marquis,
while GM is shuttering them.

Wouldn't you really rather drive a Buick?

 

Toyota is adding signs to their vehicles? Cool!

Matt

 

wolfpuppy wrote:

Nope, sounds as though you're confusing debt (bonds) with equity
(stocks). Shares of common stock give the purchaser equity, i.e.,
partial ownership, of the company, with no guarantees. If the company
prospers, it may pay dividends and the share price should increase -
investors make out well. Unless you buy a company's public offering, it
never sees a nickel of what you pay for your shares.

A bond, OTOH, is an IOU issued by the co., generally for a fixed term
(maturity date) and for either a fixed or variable interest rate. If the
co. stays in business, you get the interest due on the bond as well as
your principal back at maturity. The price may fluctuate in the meantime.

If the company goes bankrupt there's a hierarchy established legally as
to who can claim the company's assets. No. 1, of course, is the lawyers,
followed by the bondholders (not necessarily no. 2, bondholders would be
in the larger class of the company's creditors), employees figure in
there somewhere and shareholders are at the bottom (see below).

A company's shares are very definitely not loans of any sort.


http://www.sec.gov/investor/pubs/bankrupt.htm

http://www.investinginbonds.com/learnmore.asp?catid=3&id=54

In order of their priority...

In a bankruptcy, assets and proceeds are distributed to satisfy claims
in order of the claims' priority. Investors who take the least amount of
risk are paid first. As a result, creditors and bondholders who lend a
company money will be paid before its stockholders, who have purchased
an ownership stake. Creditors are paid after legal and administrative
costs have been covered.

1. Secured creditors, whose claims are protected by specific assets or
collateral, such as real estate, are paid first.

2. Then unsecured creditors, which often include bank lenders,
bondholders and suppliers, are next in line.

3. Stockholders, who have purchased a portion of the company, are paid
last, if there is money available after the secured and unsecured
creditors' claims have been paid.

 

Which part of "its not a loan" don't you understand

 

I think you are confusing his sig line (under the --) for his post.
No, stock is not a loan and it doesn't have to be repaid
(re-purchased) by the company.

So, bought any GM bonds lately?

 

Nope. Business 101. When you buy a stock, you are, in effect, loaning the
company money. Period. Play semantics all you want, but that is what it
is.

 

With stocks, you are taking the risk that you may make some money; however,
it is still a loan to the company. If the company didn't want or need extra
capital, it wouldn't offer the stocks in the first place. Come on, dude,
didn't you ever take a business course?

 

It is too a loan. It only doesn't have to be repaid if the company goes out
of business--that is the risk part that you, as a buyer, agree to. In
return, you are hoping for dividends and an increase in the value of the
stocks. Still a loan.

 

Let's keep it simple. You buy a share of stock, where does the money go?
The company. It isn't any simpler than that.

 

You're arguing semantics again. If you can't pay the car off faster than
the depreciation, you are, by definition, upside down in the loan. And,
yes, a dealer will offer whatever loan will entice you to by the car. Of
course the lender is behind it, but the lender is often the manufacturer of
the car, i.e. GM credit, or Ford credit.

As for me, I pay cash for my cars.

 

I think Consumer Reports is very trustworthy. I know of no-one who has the
resources to purchase fifty or so cars every year and put them through the
tests that they do.

As they accept no advertising or allow their name to be used by others, and
considering that they get their money only by subscriptions from us, the
reader, what in the world would their agenda be except to give out the best
possible advice?

 

When you buy stock, you are not loaning the company money, period. You do
not have to take my word for this, go to the New York Stock Exchange's web
site nyse.com and click on the glossary link. I do not know your business
background, but I suspect that the folks at the New York Stock Exchange are
more knowledgeable about stocks than you or me.

Look up stock, common stock, capital stock, preferred stock. The
definitions basically say that stock represents shares of ownership in a
company.

Then look up bonds - the NYSE glossary basically says that bonds represent
debt.