Used car dealers adapting to changing market

The following interesting article appeared in a USA newspaper. After reading it please provide your comments on whether you are holding on to your vehicle and just making repairs, or you are taking advantage of the incentives provided by new car makers, or you ar finding the best deals on used cars, trucks, SUV's or lease takeovers.

By GARY PINNELL
Highlands Today
Published: May 13, 2009

SEBRING - In a poor economy, new car sales decline, but used car sales improve.
Well, that was the traditional thinking. This is the new economy.

"These times are so tough that consumers are even discouraged from buying used vehicles," said Dale Buss, who blogs for industry watcher Edmund's Auto Observer. "This may be the worst year in two decades for used car sales."

There are two reasons, both linked to the recessionary economy:

•With a few exceptions - new car sales are down from 30 to 50 percent, according to a Reuters analysis.

•New car deals are so generous, they're actually cheaper than the one-year-old used version of the same model, said Edmunds.com CEO Jeremy Anwyl. "This is an unusual economic event," Anwyl said. "It can actually be less expensive to purchase a new car than a used car."

Economic adjustments

Used car dealers aren't giving up, they're fine-tuning. "We're lightening our inventory," admitted Jeremy Leach, a salesman at McPhail's Auto Sales, a lot on U.S. 27 in north Sebring. Used car sales are down 30 to 50 percent, Reuters said, a figure Leach agreed with. "People are fixing their used cars instead of trading them in," Leach said. "That's what I'm hearing from them."

Even so, a good used car is getting harder to find. "If you want something that's nice and clean," Leach added.

Used car dealers rely on new car dealers to call when they take a trade-in with too many miles. But because new car sales are down, there are fewer trade-ins.

Calls from new car dealers are down 50 percent, Leach estimated, and Alan Jay Wildstein said rental companies are holding their cars longer, too. Also, new car dealers - who sell used cars as well - are keeping used cars that were considered marginal in the old economy. "And cars are so much better than they used to be," Wildstein pointed out. He owns new car dealerships in Sebring and Avon Park.

Years ago, a car with 60,000 miles was considered near the end of its life, Wildstein said. Now Kia and Hyundai, for instance, offer a 10-year, 100,000 mile warranty. "We are wholesaling less vehicles," Wildstein said. "That being said, we're not keeping the secondary cars." "We want to have some higher mileage vehicles for customers who can't afford a one-owner, low-mileage car," said Stanley Wells, co-owner of Wells Chrysler in Avon Park.

At the same time, customers are shopping for older cars these days, Leach said. In previous years, McPhail relied on one- and two-year-old cars. Now, they're selling more three- or four-year-old models. "That's what customers want, so that's what we're carrying," Leach said. "Most of our inventory is under $10,000."

Better times

Two events have improved sales though, Wildstein said. Gasoline is $2 per gallon cheaper than it was six months ago, and as a result, customers have returned to buy light trucks and SUVs. And their trade-ins are worth more. "They were upside down," Wildstein said. Interpretation: when gas was $4.25 a gallon, even gently used SUVs and trucks often were worth less than was owed to the finance company.

"They don't have negative equity anymore, so that's made the market better on the truck side," he said. And because the market is stronger, dealers are again keeping used SUVs and trucks.
"Compared with new vehicles sales - which are at lows unseen in decades - the used car market is doing well," said Buss, observing another new economy trend. "Desirable used vehicles are becoming harder to find, pushing up their prices, while today's new cars are heavily discounted."