Tuesday, November 10, 2009

Car sales a windy road

It might be a good time to consider trading in that late-model used car or truck and pick up a new one, according to two national automobile associations.

The auto experts base their assumption on a variety of factors:

• The Cash for Clunkers program depleted the used-car inventory, because the cars that were traded in were crushed, not sold again.

• People are holding onto their used cars for an average of a year longer than they did five years ago.

• Rental car companies are holding onto vehicles longer.

• And new cars are in short supply during the economic recession.

Local dealers have mixed views on the subject.

They all agree Cash for Clunkers was a success, but they also say the event pushed many buyers into the market early. Instead of waiting several more months to buy, they bought early, getting rid of their old cars and buying something new.

Other dealers say the program pushed many lifelong used-car buyers, who would have driven their rides until they could be driven no further, into the new car market for the first time.

Independent dealers say they are paying higher prices at used-car auctions. New dealers say their inventory of used cars is holding strong. Some dealers have refilled their lots with new vehicles, while other dealerships are waiting for factories to increase production. And a seller of lower-end used cars said he can’t keep up with demand.

“A dealer with normal demand, stationed in a normal metro area, should be able to give you normal market value (for your used car), because he is in need,” said Juan Flores, director of valuation at Kelly Blue Book. “Right now, as a customer, you might have a leg to stand on. You might be able to negotiate.”

Bottom line, said Paul Taylor, chief economist for the National Automobile Dealers Association: “There are currently about 5 million fewer used cars (coming) into dealerships on a yearly basis.”

The confluence of events has driven up the price of late-model used cars in each of the first eight months of the year, Taylor said in an e-mail to The Daily Sentinel.

Kenneth Simon, general sales manager for Western Slope Ford, Lincoln, Mercury, Toyota, 2264 U.S. Highway 6&50, said during the height of Cash for Clunkers there was a shortage of late-model used cars, but the market has corrected itself. And the manufacturers who supply new vehicles for his dealership have been able to maintain his inventory, he said.

The story is different at Grand Junction Chrysler Jeep Dodge, 2578 U.S. Highway 6&50. Chrysler shut down its factories for two months and is taking another month and a half to ramp up production, said Mike Edwards, general manager.

Edwards said the dealership would average 35 to 45 sales a month, but with vehicles going out the door and no new stock coming in, he’s down to 32 vehicles. Edwards said he expects 132 new vehicles during the next two months. When they arrive, his lot will be fuller than it has been in months.

Edwards said late-model used cars are holding their value, but Ron Bubar, owner of Grand Junction Subaru, 2496 U.S. Highway 6&50, said those used-car prices are now either leveling off or declining, compared with two months ago after Cash for Clunkers ended. Incidentally, Bubar said, during Cash for Clunkers the dealership sold 42 vehicles. It was the best month it ever had, he said.

Bubar said he is not overpaying for used trades at auctions because he doesn’t want to be stuck with cars sitting on the lot for months that he cannot sell.

“We want inventory to turn quick,” he said.

On the new-car side there are some shortages. Bubar said he has been in communication with his district manager four times this week, pressuring him for more inventory because of consumer demand. Subaru has increased its light-vehicle sales in the past 10 months by 13 percent, according to a report released Nov. 3 by Automotive News.

“It’s a good problem to have,” Bubar said.

The dealers that are suffering from increased used-car prices are the smaller independent used-car dealers, said Mike Alano, sales manager for Modern Classic Motors, 975 Independent Ave.

Alano said he is having to pay more for used vehicles at auction because dealerships that were dropped by downsizing manufacturers are now restocking depleted inventories through those same used-car auctions.

“Now I’ve got to compete with them,” Alano said. “Getting a nice used car right now is very difficult.”

Looking for a new used car for her son, Denise Huffines, from the Roaring Fork Valley, is learning the problem is not finding the car, but finding the right car at the right price.

“I never buy new,” she said while looking at a used Toyota in the lot at Grand Junction Subaru. For the $6,000 she is willing to spend on a used car, she is finding that a decade-old ride is going to cost in the neighborhood of $6,000, which she said was about right.

“I think they are pretty reasonably priced,” she said.

Meanwhile, Kay and Pier Maraschin, from Grand Junction, were shopping for a new Toyota Prius hybrid at Western Slope Toyota. They already own a 2006 model of the same car but want the latest features.

Kay said she won’t be trading in the Prius but is working hard on her husband to part with an old pickup. A trade-in could offset their biggest gripe about the car: It costs $4,000 more than they want to spend.

Until drivers decide they want new cars, those vehicles will sit on dealer lots.

Bob Belcastro, manager of Belcastro Motors, 841 N. First St., knows all about cars sitting for too long on his sales lot. He said sales are way down, and if no one is buying, no dealer wants to load up on used cars.

“No sense having 2 1/2 million (cars) sitting here if you only talk to 10 customers a month,” he said. “We’re not moving that much product. I don’t know who is.”

Jim Wilcox, owner of A Pawn Shop, 353 Pitkin Ave., said he is. His vehicles are, for the most part, around a decade old and sell for a few thousand dollars.

Compared to last year, Wilcox said he has twice as many people bringing in vehicles for loans, and half as many are returning to pay off their loan. Also, compared to a year ago, he is not shopping for inventory. Instead, people are bringing in more vehicles than he can sell.

“I am turning down cars that I normally would buy, and I’m selling the hell out of them, and it really surprises me,” he said. “I’m giving less for cars now and selling for less ... and doubling sales.”

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