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Currently in crisis, the government have been urged to provide immediate financial support to the UK’s car industry. Knowing the tough economic times ahead senior motor officials have met with ministers to appeal for assistance. With 850,000 jobs at risk within the auto sector, there are some tough decisions to be made about the future of this industry. It is fair to see that government intervention is important, however it seems that unless quick decisions are made many jobs will be lost with manufacturers, dealers and auto-service industry trying to survive in the Tsunami of global change. Without doubt the banks and bankers are responsible directly for creating the issues we all face; we have put too much trust and money in institutions that have gambled and lost in the biggest financial shamble in human history. Yet instead of bailing out the people affected, the government bailout those who caused it. Ignorance is bliss! If it is right to bail out banks, then it follows it has to be right to bail out those effected such as the Auto Industry, and following the U.S example, short term financial assistance is required yesterday. As yet, there are no firm proposals for urgent rescue packages, and this has led to manufacturers like Vauxhall offering is workforce at one plant a sabbatical on 30% pay. The US stands by its Auto Industry, stating disorderly bankruptcy in this industry would be a huge blow which the US economy could not withstand. The UK should follow suit, however it seems that slow reactions and a lack of understanding the implications will provide a new year full of job loss, worry and uncertainty in an industry that in the UK is both productive and efficient.

So with all the doom and gloom throughout the industry, just what kind of impact has it had in terms of the online world? Well once upon a time – the car finance industry used to be one of the most expensive for online advertising even though it was still cheaper than offline (as seems to be the case nowadays). The reality is that since the credit crunch, advertiser spend has decreased drastically, which has meant less competition within the industry. The less amount of competition there is, the cheaper the online rate in terms of cost per click advertising like the favourable pay per click on Google AdWords. This demise has seen the car financial industry almost half in terms of cost and so many have benefited from this decrease. However, the fact that only a few lenders are now providing finance to the car industry means that only a very select few can actually offer such deals to their customers, which has meant that less people are indeed searching or applying for finance because they know that in all probability – their application will be rejected. So, to summarise then – the competition may be less and therefore the cost of advertising in the car industry may be less but overall, there are less visitors searching for a credit service, which provides a strange kind of balance and one that has seen many financial institutes feel the pinch of the credit crunch more than others in different industries and markets.

With the car industry operating at such low levels due to a lack of demand and credit, it has meant that more and more car repairs are being required. The reason being that due to the credit crunch, people are simply not buying cars as they do not have the finance available for the purchase. As noted in many previous blog entries one of the main reasons for this is due to the fact that money is not being loaned out to buyers by the banks. This has therefore led to a lack of demand for cars hence the reason for the demise. So, with people not buying cars, they are reluctantly in some case being forced to keep their current vehicle longer than they would normally like. This has meant that as the car gets older by the day, the warranty on any new vehicle will be getting closer to running out, which means that the driver or owner of the car is responsible for the uptake and maintenance of any repairs that may be required. So, even though many of the main automotive manufacturers have seen sales figures fall, with October being the worse month since 1995, the repair centres have been busier due to older cars being on the nations’ road. This is in the form of MOT’s general repairs and even upgrades. Ok so the profits generate from such areas is nowhere near as much as when a car is old but nonetheless, no business should turn its nose up at any form of income coming in. When the whole credit crunch does eventually die down, no doubt the repairs centre will then revert back to a more normal way of business and the demand for repairs will be as it normally is.

It was announced on the national news yesterday that car sales have apparently decreased by a whopping twenty five percent due to the credit crunch / crisis. The month of October 2008 was the worse month for sales numbers in over seventeen years. Whilst this is no doubt a bad sign, surely the fact that Christmas is only round the corner has played a big part in the sales decline? Surely the last thing on peoples mind is to upgrade their car or to use credit to get a car? In terms of new cars the statistics showed that there was a twenty three percent decrease compared to the October 2008, which makes for bad reading if you are a car dealer. In fact, with the way things are going at the moment for the car industry, it is being predicted that the sales in 2009 could decrease to the lowest levels since 1995 with less than two million cars being sold. My personal opinion on this is that the banks who are no longer lending people the finance to buy a new car are the biggest contributors to the low number of vehicle sales being recorded. If the banks were to provide more money to the various lenders then I am pretty sure that the automotive industry would benefit a great deal as people will then be able to afford to buy. The sooner this is done the better it will be and the manufacturers such as BMW, Mercedes and Jaguar etc will be able to rest a lot easier. With more credit available, more cars will be sold – it is as simple as that. This is because many people rely on such financial incentives when purchasing and so to take that away from them is bound to have a negative impact on business.

It goes without saying that the credit crunch has gone some way to damaging the economy and businesses alike. Thin thing is it only directly has an impact on certain businesses but the knock on effect this provides to others is huge. Take the car industry for example; they have suffered mainly because car credit is not being made available to buyers, which is something that has been heavily relied upon in the past as it is main attraction; loaning the money to buy the perfect car. The dealers themselves are promoting that even those with a good credit rating and credit score are being denied loans more often than usual and therefore this is having massive implications on their business. It seems that buyers have postponed making big purchases like cars and this is one of the reasons why. Obviously, the fact that less money is available, people are being made redundant at work and the fact that the mortgage market is not what it was have also contributed but in an indirect way. The direct impact has come from car loans (be it with bad credit or good credit) are no longer readily available for buyers. Figures show that many dealerships provide finance for up to eighty percent of their cars sold through via their showroom. To take that much business away is sure to have implications, which is why the car industry as a whole has suffered and continues to do so. The reality now being that a maximum of thirty percent are now sold through dealer issued finance makes for negative reading.

I recently was reading a damning report into the insight of the credit crunch in America. One of the points that really stuck me was that it is expected up to forty percent of automotive dealerships could potentially close down in 2009 due to the economic climate. The reason being that there is less of a demand from the public for cars and so a record number of poor profits are showing for all the main car manufacturers. One of the reasons for the lack of demand is due to the fact that when people buy a car they rely on obtaining car credit to help fulfil the purchase. Many will apply for credit based upon the overall value of the car. Others may offer an initial amount that they have managed to save and then use credit to pay off the remaining balance of the car. However, with such financial offerings no longer being readily provided to buyers, it has decreased the overall demand and so many people cannot, whether it is through choice or not, buy cars anymore. It is because of this downturn in the market that has seen forecasters predict that a record number of vehicle dealerships will indeed cease business. The hope is that these businesses can somehow manage to get through 2009, which is predicted by many to be a crunch year for businesses and see it through until 2010, which may well be the time things start to take a turn for the better. However, with no guarantees in place, it seems that not only the car industry but also many other industries are left hoping for a brighter outlook.

It seems that there are more than a few issues with the current car industry as a result of the credit crunch. Like with the housing situation, it is a good time if you have money and are a buyer as prices are less. On the flip side then – if you are a seller then it probably isn’t such a good time to be selling. So, with the lower number of sales hitting the new and used cars marketplace, this also has a knock on effect in terms of car credit and car finance applications. As we all know, the situation at the moment isn’t ideal and so most industries have been hit in one way or another. The good thing is though that people are indeed still buying cars albeit it at a lower rate. The problems come when people stop buying cars and/or credit. That is when the alarm bells will begin to ring (so to speak). As noted in a previous blog entry, there are many applications for car credit being made by people online but I think the Website owners are trying to cut these numbers down by ensuring certain criteria is met before they receive an application. The reason for this being that they can filter out those with very bad credit as they know that in the current climate, they will just not be accepted. This therefore saves a lot of leg work and administration time. There are also costs associated with running a credit check against an individual, which is also one of the reasons for filtering things out.