Hyundai Believes in You
Under normal circumstances that are part of a serious economic contraction, credit extension contracts as the ability to repay debt is impaired. Not this time. After banks lost every fractional reserve dollar they had, and more that they do not, the FED and the Treasury are trying to force cash out the door and into the the needy hands of the credit impaired. South Korea, after decades of exposure to American culture, has taken the next step in this process of loaning no matter what.
I saw this commercial at least 5 times during the NFL playoff games this weekend and I did a double take each time. Basically Hyundai would like you to come in an buy mortgage a car, and if you lose your income in the next 12 months, you can return the car! Now one may wonder why someone at risk of losing their income would finance a BRAND NEW CAR, but such thinking is useless. From Yahoo Finance:
AP
Hyundai: Can't make car payments? Just return it
Monday January 5, 6:05 pm ET
By Dan Strumpf, AP Auto Writer
Hyundai offers to cover depreciation on returned cars in bid to woo skittish consumers
NEW YORK (AP) -- Can't make the payments on that new car you just bought? No problem -- just return it free of charge.
At least that's the deal being offered by Hyundai Motor America. In a bid to woo skittish consumers, the South Korea-based automaker will cover the depreciation on any returned leased or financed vehicle for the first 12 months to those who find themselves unable to make their car payments.
"We're seeing people who are stuck," said Joel Ewanick, vice president marketing for Hyundai Motor America, in an interview. "Really they have a mental fatigue and they're really nervous about their long-term financial situation, so we started working on that side of it."
Deadbeats need not apply, however. The "Hyundai Assurance Program" only applies to customers stricken by misfortune outside of their control, such as losing their job, becoming disabled or losing their driver's license for medical reasons.
Customers must also have made at least two payments on the car already. In addition, Hyundai will only refund the depreciation on the returned car up to $7,500.
"For the normal person, this should cover any normal depreciation in the first year," Ewanick said.
After the first 12 months, customers have the option of extending the program for a fee through their dealership. Customers who pay cash for their car don't qualify for the program, Hyundai said.
Hyundai, which launched the program on Friday, said the program is aimed at consumers too nervous to spring for a new car in the difficult economy. The slump in consumer confidence has been one of the biggest factors behind the collapse in new vehicle sales in 2008.
For this reason, traditional incentive tactics, like low-interest financing or cash bonuses, have been much less effective in boosting sales recently, Ewanick said. Economic anxiety -- rather than cost -- has been the biggest factor holding consumers back from big-ticket purchases.
"This is a recession of fear, a recession of confidence," he said. "It's much more severe than what we saw in the early '90s."
I agree that the best way to help someone that has "mental fatigue" and is "nervous about their long-term financial situation" is to commit them to a 5 year new car loan and double their car insurance premiums. If anything goes wrong, just return the car hassle free. When will they come up with a program like this for real estate?
It is curious that people paying all cash for a Hyundai are excluded. This must be some weird arbitrage thing with whomever Hyundai has insured this program with. Any thoughts as to who may have insured this deal? Probably AIG knowing those clowns.
Mission Creep
While there are many commentators that have asked just how the FED and Treasury are ever going to get extricated from the loan business, those two institutions seem oblivious. The government thinks they know when home prices are too low (but not too high), when home sales are too low (can never be too high), when car sales are too low (never any over consumption here), or when banks are not lending enough (fractional reserve banking knows no limits). To prove how they know these things the government is about to make sure those kinds of numbers jibe with what thy want.
Where will this end is any one's guess. With funding essentially endless and cheap we are going to see the government begin to set "targets" for various sectors and indices. A central planned economy has never worked out very well, but this time may be different. It seems we spent almost all of 2008 pretending that things were not that bad only to cave in and accept how bad things have been overextended. Sadly it seems that 2009 will be the year we pretend that the government can stoke demand to make things all better. Playing pretend can be fun for the lonely and for small children, but it is not responsible behavior for serious adults. I wish we had some serious adults in charge.
Have a good night.
