Dodge & Chrysler go Subprime with 0% 72 Month Financing
DaimlerChrysler has joined Ford & GM in relaxing the standards for its 0% 72 month financing. The dealers like it because it allows them to sell cars to customers they would otherwise walk. The accountants should hate it because it will be hard not to book a high bad debt reserve. Although Chrysler brass may look at the program as an alternative to further discounts. In reality subsidized subprime loans are a ticking timebomb waiting to explode.
The Detroit News profiles the new customer that Chrysler is looking to hook up:
"How could it not work?" asked John Berry, a sales manager at the Hollywood, Fla., dealership. "Just today we had a customer that we would have missed if the new rules weren't in place."
A single mother of five with subpar credit drove off Tuesday in a new Town & Country minivan because she qualified for the financing deal, Berry said.
What do you think the odds are that nothing bad will happen over the next six years to that "single mother of five" that will keep her from making $600/month car payments? A lot of these cars will be coming back as repos. They could trash the resale values for years down the road. Don't believe me? When was the last time you heard of someone buying a Mitsubishi Galant retail? Easy credit policies put Mitsubishi's US operations on life support, and the patient will be in the hospital for the foreseeable future.
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