Putting off buying a new vehicle.

Good afternoon Willem.

I agree with you 100% Willem, as i retired in 1990 at the age of thirty eight, and havent had the need for Bank finance, i tell everyone to pay cash for things, if they can, and not to use the banks,i dont have credit cards, only one debit card, and life is so good without those things, i own everything i have, including my tojo.

Cheers for now William h...Bunbury...WA.

Landy,

So what do you think the impact on vehicle prices will be? Usually a slowing of demand leads to discounting, but of course the manufacturers are struggling with profits down, and the slide in the dollar pushing prices up. Wonder what the overall impact will be?

Maybe a good time to buy if, as Willem suggests, you don't need to drive yourself into serious debt to do it.

Matt.

Hi Matt

I think that is a good question and one that came up in another thread just recently.

I think the best option for the car manufacturers will be to run down inventories and slow the manufacture of vehicles. There is clearly a large global stock of vehicles and the major companies already have plans in place to slow production and reduce inventories.

However, does this mean a reduction in prices of new vehicles? At the margin there will be discounting at the retailer level, but it isn’t the answer to the problem and it is unlikely there will be major price reductions by manufacturers.

This issue isn’t one of price, but that consumers are simply not willing to buy at present. Will a price change influence that? Again, at the margin there will be those that it will, but for the mainstream consumer it won’t. They are more focussed on paying down debt, saving, and deferring major purchases.

So discounting the price of new motor vehicles may not have a great impact in terms of influencing consumers to buy in the current environment.

Once the crisis passes, and it will in time, consumers will be in a far better shape having paid down debt and spending will eventually bounce back. But before that happens they will want to be confident about the economic outlook and job security.

Mind you, the other part of the equation is commercial buyers of motor vehicles; most companies are also paying down debt and reducing expenditure, so there will be declining support for sales from this group.

In Australia, we are only now beginning to feel the ‘real’ effect of the massive global downturn; the next 3-6 months will be very telling and a challenge to our policy markers.

Good luck….

"It's interesting to see how fear of a recession can actually make a recession happen."

You've hit the nail squarely on the head with that observation, methinks.......

Obversely, if everyone ignores it and does exactly what they would have otherwise, is there no recession.

Yes i agree with you, and also if you take off your wrist watch, for a few days, and then see how you feel, by just not working to a time, and doing things when yoiu need to, is a lot better and your stress levels will come down.

Cheers for now...William H...Bunbury...WA

Interesting comment Chris.
There was some clown on ABC the other day saying that on average super funds had lost 18% over the last 12 months and if you are 60 or over you will NEVER make up the loss.
I really had to laugh people will say anything controversial to get in the media.

The reality is that it's a paper loss only unless you sell. The markets will inevitably rebound. History shows that it will be higher than the previous high.

Plus no one needs every dollar of their super on the first day of their retirement.

So there may be some pause in the accumulation but in five years the difference may not be that big.

Hope your 100 and CT serves you well. You may like the flexibility and not want a Caravan with the lot!

Hi GT

“The reality is that it's a paper loss only unless you sell. The markets will inevitably rebound. History shows that it will be higher than the previous high.”

Time does fix most things (even a bad haircut), but the reality is whether it is a paper loss or actual loss is academic as your wealth has declined at this point and you are relying on better circumstances and time to fix it.

Who knows when that might occur and if you are 60+ years of age, even 5 years waiting for the recovery is a long time if you are reliant on it to make ends meet and do the things you have worked all your life for…….

As an aside, I think the superannuation industry has had a free kick with our money that pours into the superannuation coffers each week under compulsory superannuation; I don’t think superannuation should be compulsory, but left to individuals to determine how best to manage their own savings for the future.

Many have paid into superannuation for half their lives and more; paid management fees and when needed the most find that there is only half of what they expected left in the tin……

Cheers, Landy

Agreed Landy (although I was told the difference between a good haircut and a bad one was only 2 weeks)

The point I was making was that without a doubt this is a setback at age 60, a pause in the growth of the nest egg. But it's not total disaster as some commentators are making out.

Any super fund should have a balanced portfolio to minimise risk.
Investing money is a risky business.

Hi GT

Yes....too true about investing money, but I'll need to change barbers, ends up being three weeks for me! hahaha.

Cheers

Hi GT,

A couple of points:-

"The markets will inevitably rebound. History shows that it will be higher than the previous high."

Concur. History certainly does show that and I'm ardently hoping that it does it again.

"The reality is that it's a paper loss only unless you sell. "

Yes and No to that one. The problem is that the stock market goes down, interest rates go down and dividends also tend to follow. Those who rely on interest and dividends find themselves with a lower income. In extreme cases, some people are forced to start liquidating assets and that becomes a bit of a death spiral, ending up with a visit to Centrelink and zero prospects of getting back to where they were. All we can hope for is to survive until there's an upturn.

"There was some clown on ABC the other day saying that on average super funds had lost 18% over the last 12 months and if you are 60 or over you will NEVER make up the loss."

Well, I for one hope he's wrong! I'm over 60 and I'll be trying VERY hard to get my super back to where it was when I decided to quit work.

SWMBO and I worked long and hard to enjoy our retirement and I'll be blowed if I'll allow some US banker to shaft it. :-))

Cheers,
Chris