For local car dealers, it was summer of love

Two little words saved this year’s automotive market: employee pricing.

The incentive package with the clever name, started in June by General Motors Co. and picked up in July by Ford Motor Co. and DaimlerChrysler, turned what could have been a tough year for local dealers into what may be one of the strongest on record.

“The year started off tough and then GM offered the family purchase deal and I think it pulled people ahead of the market,´ said Warren Yoder, general manager of Greeley’s Weld County Garage. “We sold four months of vehicles in two months’ time. I think it will take a little bit of time for us to get back.”

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Yoder’s experience is a reflection of the national and Colorado market.

“Partially because of the employee pricing in July, we hit a all-time record for the month,´ said Jeff Beddow, public relations manager for the National Automobile Dealers Association. “Overall we are on pace to sell 17 million new cars this year.

“Historically this will be the fourth- or fifth-strongest year for car sales, but it will still be a very strong year,” he said.

In Colorado, July was also a record month for the number of cars sold. The exact number of new car sales is not known because of a two-month lag in the data-gathering process. Still, Tim Jackson, president of the Colorado Automobile Dealers Association, looked at other indicators to determine the record status of the month.

“The month of July was an all-time sales record for GM, Chrysler and Ford, and it was also a record month for Toyota, Honda and Nissan, even though they didn’t offer employee pricing,” Jackson said.  “Almost every dealer in the state is up.”

The employee pricing brought consumers into the market, which benefited the other manufacturers. The timing of the offers also allowed dealers to move the 2005 year model cars off the lot to make room for the new 2006 models.

“For the consumers it was a better deal than most are – it definitely made the cars less expensive,” Jackson said. “For example people could buy a sport-utility vehicle that is normally $50,000 to $55,000 for $32,000 to $35,000.”

Used car sales up, prices down

As of the second quarter, the association forecast new registrations in Colorado would be approximately 193,000 by the end of the year. The sales push in June, July and August will likely increase the number of registrations statewide.

“Our sales have been fantastic,´ said Ryan Ferrero, general manager and owner of Ferrero Auto Center Inc. in Loveland. “In 2004, our sales were 21 percent over the year before and this year they are looking to be 25 percent over.

“The employee pricing has offered some fantastic deals and it offered such a bite-sized way to identify the incentives,” he said.

Spradley-Barr Ford in Fort Collins saw an increase in new car sales and Phil Morgan, general sales manager, said the increase in new car sales increased the dealership’s used-car inventory because of all the trades.

“Used car sales have been steady … but the influx in the used market is bringing the prices of used cars down,” he said.

The brands offered at Ed Carroll Motor Co. Inc. – Mitsubishi, Volkswagen, Audi and Porsche – did not encourage sales with employee pricing. But the dealership still got a boost.

“I think the summer’s strong domestic sales market simply brought more consumers into the market,´ said John Carroll, general manager for the Fort Collins dealership.

Carroll said sales increased throughout, but mainly with Volkswagen’s diesel cars.

“Our sales were not above and beyond, but more people were looking at our cars for their own merit; we have also had huge diesel sales,” he added

Predicting the second half

The aftermath of Hurricanes Katrina and Rita along, with rising gas prices, is expected to soften the car sales market.

In its second quarter report, CADA predicted, “… new vehicle sales will move lower later this year and in 2006 … consumers are pretty much tapped out after years of robust spending, negligible contributions to savings and escalating debt.

“We believe there are several factors that will prevent the market from falling off a cliff and should keep sales humming along at a respectable pace. Productivity and personal income are growing at healthy rates, which should give consumers the ability to ease their spending habits without with out sending the economy into a tailspin.”