With New Car Sales Expected To Fall, Dealers Stock Up On Used Vehicles
As automotive sales slow, victims of lower consumer confidence, dealers say they're changing business practices to stay profitable.
Metro-area dealers are stocking up on used vehicles, bolstering their repair business and pinning hopes more than ever to sales of newly released vehicles.
January sales figures come out Friday and the picture looks dim. Analysts predict 2008 will be the worst year for new car sales in a decade with about 16.1 million sales. Last year about 16.2 million vehicles sold in the U.S., according to Automotive News.
Doug Wilson, president of Wilson Dodge Hyundai Kia, said he's stocking more used vehicles, especially those in the $6,000 to $9,000 range, where there's a strong market.
"People aren't going to drive a skateboard down Lakeland Drive. They're either going to buy a new car or continue to maintain and repair their old cars," he said. "We're emphasizing our service and parts departments and making sure our customer service is right on."
Some trade-ins the dealership would have gotten rid of instead get reconditioned to contribute to the used inventory. Repairs of used vehicles that would have been outsourced now are done in-house to save money, he said.
Analysts at Edmunds.com said sales of used, certified vehicles, which are newer-model, dealer-inspected rides, will jump in 2008. Consumers will look to spend less and seek a greater sense of security in their next used vehicle purchase.
According to Edmunds, leasing will stay at about 18 percent of total new-vehicle transactions with luxury manufacturers leasing the largest share. Some dealers are pulling back on prices paid for trade-ins but buyers will be able to cut deals in the poor economy.
"As in 2007, next year will be a buyers' market for most large vehicles and a sellers' market for the industry's most fuel-efficient vehicles," said Joe Spina, senior remarketing manager at Edmunds. "But those hybrid SUVs that cost a lot more than their nonhybrid counterpart will not sell as well."
Allen Levenson, vice president for sales and marketing at Asbury Automotive Group, which owns the Gray-Daniels dealerships, said a tough economy makes dealerships' other business lines all the more important.
"Used cars, both certified and traditional, are an important element to helping dealerships remain profitable during challenging economic environments. The same is true of service and parts and finance and insurance, both of which are very stable businesses," Levenson said.
"As a result of having four distinct lines of business, the three just mentioned plus new vehicle sales, dealerships are generally able to remain profitable through all economic cycles."
Several dealers said low consumer confidence, shrunken by hundreds of media reports about economic problems, is as much to blame for slow sales as anything.
"So far, consumer confidence has taken a bigger hit than the actual economy," Wilson said.
John Taylor, general manager at Metro Mitsubishi Hyundai, said to turn around the situation, confidence has to return on a national level. "(Buyers) have to be shaken up and told, 'It's OK,' " he said.
Taylor said neither new nor used cars moved for many dealers in January.
"I keep up with a lot of dealers and attend conferences. The Industry is in kind of a fog. Nobody actually knows what's going to happen. There are dealers out there who are really pulling their hair out," he said. "February has to be a good month, otherwise there will be casualties."
Anticipating a repeat of last January's healthy sales, Metro and others stocked up in November and December only to see a flop this month.
Taylor blames changes in tax refund distribution, financial institutions being tighter with tax-advance loans and predictionsof a coming recession.
"Some people are scared of spending so when they do get their refunds, they might not spend," he said. "We were waiting and anticipating that 60 percent of the people would be out putting that tax return money into the market, and it hasn't happened."
On the new car side, a steady stream of freshly released models will help sales.
Barksdale Cadillac general manager Ted Enstrom said the new CTS, recipient of several industry awards, is pulling up sales. Even in soft economic times, demand for luxury vehicles tends to stay strong.
Wilson said new Dodge-brand vehicles will be a welcome boost.
"The main thing you can do to improve sales is have new sheet metal. It brings in traffic," he said.
Jack Mazurak
jmazurak@jackson.gannett.com
