Used Cars Pile Up Undermining Ford (F) And GM (GM)

The tendency among buyers of auto stocks is to look at falling expenses at the big firms like GM (GM) and Ford (F) and to hope that unit sales in the US won’t keep dropping, dragging down revenue.

The worst news for the car companies may be the action in the used car market. There are enough pre-owned SUVs and pick-ups on the market to outfit every man, woman, and child in the US.

Because used car dealers need to keep vehicles rotating off of their lots to maintain cash-flow, many offer deep discounts on vehicles that do not sell well now–SUVs and pick-ups.

Accordng to the AP “Used SUV sales in March were down 14 percent nationally compared to last year.”

Ford is counting on its new F-150 pick-up to sell well to bring the companies faltering unit volume up some. That is not likely to happen. Between gas prices and pinched consumers, the action is not there. Rapidly falling prices on used stuff only makes that worse.

Douglas A. McIntyre