However, if there is anything that we should have learned from the market crash of the last couple of years is that you should never sell when the rest of the market is panicking.

While Toyota’s product flaws and bungled response deserve plenty of criticism, some of the recent warnings have been over the top. Last week, Transportation Secretary Ray LaHood even warned Toyota owners to stop driving their vehicles. Some Toyota owners are even responding to these safety concerns by looking to trade their vehicle for a less-risky option.

Unfortunately, the negative fallout from these product concerns is causing the resale values of the affected Toyota vehicles to decline dramatically. Edmunds.com estimates that the affected vehicles have seen their values fall by up to 10%.

This can be particularly troubling to Toyota owners who purchased their vehicle on the basis that they were buying a high quality vehicle which would retain its value much better than any of its competitors.

While this crisis is certainly having a negative impact on Toyota dealerships that now seem to be almost vacant, it represents a unique opportunity to consumers.

Toyota has developed its reputation by making high quality cars and trucks that consumers like to buy. Their sterling reputation and high resale values have allowed dealerships to consistently sell their vehicles at close to actual sticker price. Toyota dealers rarely needed to resort to heavy price discounting due to the demand for their products.

This trend is almost certain to change in 2010. Soon these dealerships will get the green light to begin selling their Toyota inventory again, but they will face the challenge of winning back customers who now have serious doubts about Toyota quality. Heavy discounts, rebates and incentives will undoubtedly be put in place as Toyota looks to move their stagnant inventory.

American consumers will likely be offered the best deals on Toyota vehicles in years. It will be the consumer who will possess the upper-hand in sales negotiations. And since Toyota will certainly be refocused on producing higher-quality vehicles, consumers will be purchasing higher quality vehicles at a reduced cost.

As we begin to recover from this last recession, many individuals are making financial resolutions to insure they don’t get buried in debt once again. One of the first steps to establishing control over your finances is determining what your needs are versus what you would like to be able to afford.

Most of our needs are fairly basic – food, clothing shelter, etc. However, AdAge.com recently published an article titled “The New Necessities: Food, Clothing, And A Giant TV” that points to a new addition to the necessities category – big screen TV’s.

Consumers are rationalizing big screen TV’s as a necessity since they believe they will actually save money in the long-run by not going out to the movie theaters as often. This is further rationalized by the fact that the average American spends five hours each day watching television.

Consumers are willing to be quite creative in cutting expenses, but budget cuts don’t seem to effect their spending on consumer electronics. The AdAge article cites:

“We are seeing something really big and I don’t think people realize it yet,” said Nancy Bhagat, VP-consumer marketing at Intel. “I think we would have seen a larger slowdown in purchases if this had happened before 2009, but because the user of these devices has become part of people’s lifestyles, it’s becoming a must-have.”

Have we really reach the point where having a giant, big-screen TV is considered a necessity? If consumer behavior is any indication…I’m afraid that day is soon at hand (if it isn’t already here).

Auto manufacturers certainly welcomed the apparent return of consumer demand for their vehicles. Ford Motors reported a 17% y/y increase in vehicle sales. Most of the foreign car makers also posted impressive jumps in vehicle sales. Unfortunately, General Motors and Chrysler still saw declines in their vehicle sales, although the declines weren’t nearly as bad as some of the previous months have been.

While it’s great that American consumers have been able to take advantage of the government’s cash-for-clunkers program, the heralded program may actually end up doing more harm to the economy than help.

Most economists and financial experts already agree that August vehicle sales were an anomaly. Looking at the chart below it’s quite obvious that those numbers have been artificially inflated since these deviate so significantly from the real trend.
 

So one of the main concerns is that consumers that would have purchased vehicles in the coming months, instead purchased during August to take advantage of the clunkers rebate program. This would mean that not only will the next few months return to their pre-clunker level, but it may actually drop below those low levels. This is because many consumers who would have bought in September or October have already bought a new vehicle. Therefore, we think it’s likely that vehicle sales will return to below 10 million for the remainder of 2009.

“Surely every man walketh in a vain shew: surely they are disquieted in vain: he heapeth up riches, and knoweth not who shall gather them.” Psalms 39:6.

Another potentially negative outcome of the cash-for-clunkers program is that it likely raised the household debt levels of hundreds of thousands of consumers. Edmunds.com has already reported that auto dealers raised prices on vehicles during the month of August as buyer demand escalated. Some consumers may have even paid more during August than they would have in earlier months for the same vehicle.

Even consumers that received great deals on their new vehicles are likely now deeper in debt than they were a few weeks ago. Few people have the means to pay cash for a brand new vehicle even with a $4,500 rebate from the government. No doubt some may have even taken on more debt than they can handle. Others will be forced to cut back on future purchases because of their new car payment.

“The soul of the sluggard desireth, and hath nothing: but the soul of the diligent shall be made fat.” Proverbs 13:4