You're watching...
FoxNews.com Automotive Editor Gary Gastelu on automakers offering cheap car leases to get attract consumers back to the auto market.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Start your engines car leases are on the cheap but this doesn't signal desperation instead.
-- data data firm -- says the exact opposite.
New cars which collapsed to less than eleven million units in 2009.
Are expected to sell fourteen million units this year and the auto industry sees a rosier economy in the future and wants to pump more cars in the market now.
To satisfy demand for gently used vehicles.
In 2015.
Interest with me now is Gary gasoline foxnews.com.
Automated auto motive at a -- one reason we're seeing as scary.
Is because.
A lot of the -- the average age of the car that's out there on the road right now is eleven years old yeah that's lowers it.
Cars are very good these days -- there's not.
As -- discretionary buyers right now there's still little on the sidelines she really have to entice these people that don't necessarily need a new car right now to get back into the market.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Actually this is the best way to get them back right now could you can really.
Move a car without putting too much money on the hood and then -- second chance to sell the car three or four years down alliance and it's kind of a double dip for the auto makers as well.
Well so why is that a good business I mean -- -- now sell it later.
Our -- widest auto industry think they're gonna see this much strength down the road I guess maybe is a better question.
You know one thing that's good is that the leasing business is better than it was three -- four years ago during the crisis we're talking prime buyers now.
You don't really have to worry about these leases gone bad on me as much seeing count on them a little bit more benefit of -- while back of in the not -- money went in the the way they were back then.
But also leasing has a much higher royalty rate and financing.
Or you've industrial cash purchases so you want these people in your -- in customer base.
That's an interesting point -- get them to come in in a lease a vehicle and it's a short term lease and it's cheap chances are you'll get to resell the car there in right now down the road and they will also.
By another car for you.
And I think it's just governance in the companies themselves that they think the products they're making now are still gonna be desirable three years from now unlike when they were trying to unload suvs back into designated in the revenue chance this.
It's too good to be true at -- there's a whole in this series somewhere there's a danger down the road what do you think I -- the -- not really that strong so they are betting on people having the disposable income to make it change.
The auto industry is built on optimism probably more than any other industry you're investing hundreds of millions of dollars 34 years before the product -- -- going to be selling.
It's hitting the market so there's a bit of a self fulfilling prophecy there I think.
But you know with the restructurings store in the bankruptcies of Chrysler and General Motors and a lot of the companies coming along as well it brought more -- here to the United States the cars are better geared to the American consumer -- -- about a price.
One thing that does make me nervous about this trend was.
-- -- recently that Google has -- hundreds of millions of dollars into triple A rated card debt from Honda.
Also from Hyundai they aren't the only ones.
General -- Goldman Sachs and Microsoft -- of the four most cash rich companies that are out there.
Taking money that they would have used to buy treasuries.
Maybe they would have done acquisitions other things that they think would have the same yield.
And they're doing asset backed securities.
Which reminds me of what happened during the real estate boom when these that synthetic instruments were created.
So that banks can -- yield from something out there take advantage of a trend like what we're seeing in the auto industry it's a mile Google.
Going out there and backing leases to me that feels like another bubble.
Hopefully they're being Smart about this more -- hopefully the leasing companies.
Are being Smart about this and are gonna go back to the -- ways that could keep the standards high and growing and only give this money to people that they -- would be able to pay -- for four years do you actually have faith -- that you know I think when -- got a big company like Google -- possibly 400 million dollars this way -- -- they're not the most risk -- you have been -- -- -- -- I definitely would come to their big -- -- so like you know they're putting their -- -- Sounds good but you know again you never know with the auto industry things could collapse in two years I'm hats and our -- -- coming -- we appreciate your time Gary.
