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US stock market daily report (September 03, 2014, Wednesday)

September 4, 2014, Thursday, 04:33 GMT | 23:33 EST | 09:03 IST | 11:33 SGT
Contributed by Millennium Traders


For the first time in seven years, annual vehicle sales in the U.S. is expected to top 17 million. Vehicle sales are predicted to grow by 5.5% for year 2014 - striking the slowest growth pace since the financial crisis in 2007. Auto manufacturers have cut costs and are better positioned to handle a downturn, compared to their position during 2008 and 2009.

Since 2013, vehicle discounts have increased by 5.5%. Discounts are rising and auto loans can now be booked up to seven-year - even for some buyers who would have been turned down in the past. Car manufacturers are resorting to tactics that could potentially lead to trouble down the road.

Manufacturers are increasing factory capacity. As the average price of new vehicles continue to climb, customers are forced to finance for longer terms to keep monthly payments lower and affordable. A historically high percentage of new vehicles are moving out on leases. An increased number of consumers with low credit scores are getting loans approved from auto lenders.

Senior vice president of automobile operations of American Honda Motor Co., Inc., responsible for Product Planning, John Mendel, scolded competitors just last week for using 'short-term' tactics such as sub-prime loans, 72-month vehicle loans and increased sales to rental car companies to pad their sales. Mendel said, "We have no desire to go there." Honda sales have fallen 1.3% through July as they trail the automobile industry.

Details that have experts concerned:

- Average discount per new car through July 2014 $2,702. During July, midsize car discounts are up nearly 21% and compact car discounts are up 10% percent.

- Auto loans that are 72 months or longer have hit 32% - up from 23% in 2008.

- Leases on new vehicles are at 26% - up from 18% in 2008.

- Year-over-year increase in auto loans to 'Deep Subprime' buyers - those with credit scores lower than 550 - during Q2 2014 at 12.7%. Auto loans to "subprime" buyers - credit score lower than 620 - rose 5.3%.

- Increase in auto repossessions during Q2 2014 - 70%. Sixty-day delinquencies on auto loans are up 7%.