An interesting press release from Ford Motor Co. operations in the U.K. as they announce financial incentives (additional $2,500) to trade in old vehicles for newer “cleaner” emission vehicles in the U.K.
The offer announced Tuesday is available to new car buyers who trade in vehicles registered before Dec. 31, 2009. The cars will then be taken off the road and scrapped. (read more)
Pay attention to these types of stories within the auto sector. Watch for these types of “incentives” to cross the Atlantic. The incentives described here are wrapped around a point of cleaner emissions, ie. “climate friendly” etc. However, as we have shared the financial branch of the auto sector is in trouble; these incentives appear to be a marketing ploy.
The auto sector, in this example Ford Motor Credit, need to keep turning out new financial products (leases and loans) to cover the deficits of previously issued financial products and the financial gaps within soon to be received via massive lease returns.
There’s an influx of over-leased vehicles coming into the secondary market. Each of those vehicles returns with a residual financial loss attached (lower value than anticipated). If the underwriting auto financial system doesn’t quickly turn up additional capital they will not be able to offset the looming losses.
It will be interesting to watch it play out. The auto-finance system is trying to keep the finance bubble inflated. Unfortunately the economic odds are not favorable toward their goals.