Analysts share ideas to help auto industry
— -- Two auto analysts suggest that spending some government auto aid money for direct-to-consumer incentives could boost sales and benefit the whole industry.
They say the government could provide discount vouchers for new car buyers, as is successfully being done in Europe, or could underwrite the costs of a federal version of South Korean automaker Hyundai's successful Assurance Plan.
The key benefit of either plan: "The government fund would support the entire industry, allowing customers to buy what they want," says Itay Michaeli, auto analyst at Citi Investment Research.
It would also be cost-effective, he says. A federal program similar to Hyundai's incentive would tap what could be pent-up demand for new cars among buyers numbering in the millions for $5 billion or less, he says.
Under the Hyundai plan, you can return the car if you lose your income because you're laid off or for other specified reasons. Hyundai will cancel the loan, even if you owe more than the car's worth, and won't put a black mark in your credit file. It also, currently, will forgive three payments while you look for work before the car has to come back.
"We eat the negative equity, up to $7,500, which covers most of our business," says Dave Zuchowski, vice president of sale for Hyundai Motor America.
He says Hyundai buys insurance on each car sold to cover possible losses.
Michaeli suggests a government program cover negative equity up to $10,000.
The other plan, usually called scrappage, provides government discounts for new car buyers if they trade in old cars to be scrapped. It is currently being done in several European nations, and its value is seen as not only improving car sales — helping automakers, dealers, parts suppliers and lenders — but also retiring older vehicles that pollute more, use more fuel and are less safe.
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