||Pent-Up Demand Sends Car Buyers Back to Showrooms
Five-car garages don't seem excessive to Kevin Castelli.
In the last two or three years, he has bought seven new vehicles -- some for his home health care business, some for his cattle ranch and a couple just because he wanted them.
Castelli, 47, is another ray of hope for the rapidly recovering U.S. auto industry, whose sales are up 11 percent nationally through November.
Much of that increase is from "need" buyers finally replacing aging high-mileage vehicles. But over the last 90 days or so, dealers also have seen a welcome return of "want" buyers -- consumers with late-model vehicles who trade them in on new cars and trucks because they like the styling or nicer interiors or more powerful engines.
"You've got a lot of positive factors driving sales," said Jesse Toprak, vice president of industry trends at TrueCar.com. "But the return of impulse buyers will really help bring us back to normal and beyond."
Last week, Castelli bought his eighth car in the last few years, picking up a 2011 Ford Escape for his college-student daughter.
Despite the uncertain economy, persistently high unemployment and rising fuel prices, he remains optimistic about the economy in general and his businesses in particular.
"I have no plans to stop buying cars," said Castelli, who only purchases American products. "Luckily, the two industries I'm involved in personally have not been affected that badly (by the economy). In the future, I see myself having a five- or six-car garage."
While highly significant, the return of impulse buyers is only one driver in the sales increases.
The average vehicle in the U.S. is now 9.4 years old, compared with seven years in 2001, forcing many motorists to look for replacements.
They will find lots of shiny candidates in showrooms these days -- maybe the best array of new products in industry history.
Vehicles such as the new Chevrolet Equinox, Buick Regal, Ford Fiesta, Dodge Durango, Jeep Grand Cherokee, Subaru Outback and Hyundai Sonata are just a few of the strong draws.
In addition, used-car prices have gotten so high that the price gap between late-model used vehicles and new ones is becoming negligible, especially with the lower interest rates available on new-car loans.
"We do see real evidence that the pace of new-car sales is picking up," said Paul Taylor, chief economist of the National Automobile Dealers Association.
Through October -- the most recent period for which figures are available -- sales in the four-county Dallas-Fort Worth area were up 9 percent. However, many dealers forecast 15 to 25 percent increases in sales at their stores in 2011.
Auto sales are still far off the historic highs recorded earlier in the decade of 17 million vehicles nationally. But at least one industry analyst, Morgan Stanley, predicts sales of 14 million next year in the U.S., up dramatically from the 11.5 million vehicles projected for this year.
Most other analysts and observers anticipate sales next year around 13 million, still a 13 percent increase.
Until unemployment drops, auto sales probably won't return to their historic highs, says Sam Pack, owner of four Ford dealerships and co-chairman of the Dallas-Fort Worth Metropolitan New Car Dealers Association.
However, even with high unemployment, dealers see some encouraging signs of market strength.
For example, more than half of the vehicles traded last weekend at Pack Auto Group dealerships were vehicles 5 years old or newer -- a strong indication of the return of impulse or "want" buyers.
"I think we have an improved market, not a good market," said Pack, a veteran dealer who views the industry with cautious optimism. "That said, we've not been in a position where we've seen this many positive factors at once."
Consumer confidence is improving monthly, said Ray Huffines, chief executive of Plano,TX-based Huffines Auto Dealerships.
"The fear has subsided," Huffines said.
Two weeks ago, Chevrolet staged a ride-and-drive event for consumers in Fort Worth, expecting a few hundred to show up to sample the new Cruze compact sedan. More than 1,000 turned out, said Ken Thompson, head of the Thompson Group at Classic Chevrolet in Grapevine, a specialty sales unit at the Texas dealership.
"Every month this year, our business has increased a little bit," Thompson said. "It's moving slowly, but it's moving -- and that's all that matters."
People who have waited for two or three years to even consider a new vehicle are really ready to return to dealerships, lured by deals and hot wheels, and hopeful that the worst economic storms have passed.
"There's an awful lot of pent-up demand out there," noted David Thomas, managing partner of Subaru of Plano and a member of the New Car Dealers' executive committee. "The manufacturers that have new and interesting products are getting buyers."
Ironically, Detroit Three dealers seem to be faring better than Toyota and Honda retailers because the domestics all have an array of new vehicles.
"Just look at what happened with the new Jeep Grand Cherokee," said George Hoffer, a business professor at the University of Richmond and longtime observer of the auto industry. "Sales are triple what they were a year ago thanks to an attractive, all-new vehicle."
(Source: The Dallas Morning News, 12/19/10)
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