REGIONAL REPORT : ‘92s in, but Auto Sales Still on Idle

The new 1992 cars have just arrived in the parking lots of anxious dealerships, where salesmen are trying to crowd out memories of bleak sales with hopes for brighter futures. Rebates are higher, warranties are longer and safety features have increased--all weapons in the battle for the buyer.

But car dealers are having a tough sell, a fact that was not lost on Los Angeles stockbroker Steve Stovall. When Stovall wandered into Walker-Buerge Ford in West Los Angeles one recent afternoon, he got more attention than he was bargaining for. But then, he was the only customer there.

He wanted to buy a Ford Explorer for his wife’s birthday, and he knew what he wanted to pay--a lot less than Walker-Buerge Ford was willing to accept. Stovall won when he found a more desperate dealer to accept his low bid.

“It’s a buyer’s market,” Stovall said. “We’re clearly in a recession, so it’s a good time to buy a car.”

It’s definitely not a good time to sell one. Many auto dealerships across the Southland are finding disappointment, not excitement, as they unveil the 1992 models and close out the 1991s. Further evidence of sluggish sales came Thursday, as auto makers announced that sales of cars and trucks slid 7.0% last month compared to September, 1990. That brought total sales of the unfortunate 1991 models to 12.75 million--the lowest level since 1983.

Sales at Walker-Buerge Ford, for example, have been one-third below normal this year. “People are hesitant to buy cars because of the economy. They are not sure if they’ll have a job in six months,” sales representative J. B. Kearney said.

Car buyers of the ‘90s are more cautious about purchasing a new car, said Ted Orme, a spokesman for the National Automotive Dealers Assn. “Consumer confidence fell dramatically last year.”

According to the Conference Board’s Consumer Research Center, consumer confidence in September fell for the third consecutive month. The latest reading of the index was 72.7, a loss of almost 3.5 points since August.

That wariness has caused consumers to seek alternatives to buying new cars so they don’t have to commit themselves to long-term loans. The have turned instead to buying used cars or leasing autos. Nearly new cars, also known as program cars, have also become a popular alternative to a new-car purchase.

“This year, for the first time since World War II, new-car dealers sold more used cars than new cars,” Orme said.

Program cars are the vehicles that manufacturers sell to car rental agencies that are bought back by dealerships in four to six months. The cars generally have about 5,000 miles on the odometer, so consumers buy them as used models and continue the manufacturer’s warranty.

Program cars have accounted for 25% to 30% of this year’s sales, Orme said. They have been a boon to car buyers, because used cars are cheaper than new ones and it is easier to qualify for a smaller loan.

But they have been a mixed blessing for dealerships. Dealers lose money selling to rental agencies instead of consumers. And program cars steal sales from new cars, Orme said.

In an effort to boost new-car sales, manufacturers have increased rebates and extended their warranties. Chrysler Corp. on Thursday announced that it would cut its proposed price increases for new cars. The company had originally planned to raise 1992 prices 1.4% above 1991 levels. Instead, the increase will be 0.9%.

“Buying a new car is a major expense for consumers, so we’ve got to continually provide more value for the price,” Theodor R. Cunningham, executive vice president of Chrysler sales and marketing, said in a statement.

Beginning in August, Hyundai started offering discounts on its new models to customers who traded in old Hyundais. The company gave special rebates to first-time Hyundai buyers and increased all rebates, which now range from $800 to $2,000.

Hyundai sales have doubled from July to August, said Bert Boeckmann, owner of Galpin Motors in Sepulveda. “Without the rebates, we would have had too many (’91 models). Now we have enough to meet the demand.”

State-of-the art safety features are another incentive for buying a new car. Most companies have upgraded and added to their safety features, installing such things as air bags to comply with federal laws.

The 1992 Chrysler Voyager is offering a built-in children’s car seat that can be folded out of view when not in use. The model also has an option of a free cellular phone and roadside service for four years or 40,000 miles.

Although the more expensive cars have the most sophisticated features, dealers and auto analysts agree that luxury cars have suffered the most this year because of the recession and a newly imposed luxury tax.

In 1990, Congress passed a tax on high-priced automobiles, planes, boats, furs and jewelry. Customers purchasing a car over $30,000 are required to pay a 10% luxury tax.

“Sales on high-line cars dropped 45% in the first quarter of 1991,” said Paul Donnellan, director of congressional relations for the American International Automobile Dealers Assn. “People bought before the first of the year--before the tax went into effect--then high-line sales plummeted.”

Ray Beshoff, sales manager for House of Imports Mercedes in Newport Beach, said that because the dealership ordered cars wisely and sales representatives worked longer hours, most of the 1991 models are gone.

“It was a sluggish year, and the luxury tax had some impact,” Beshoff said.

Slow car sales have been particularly tough for sales representatives.

“This was one of the most competitive years in the business. Personally, my sales were down 30%,” said Robert Householder, sales representative at Dave Wilson’s Toyota of Orange.

Dealership managements usually offer incentives for their employees to increase sales, but some dealerships are trying to make up for their sales representatives’ reduced commissions. Some offer trips to Las Vegas.

At Walker-Buerge Ford, salesmen play a game of chance to boost their income. The winner gets cash from the dealer.

“After every sale, sales representatives randomly pick a card from a deck and multiply the points by $5,” Kearney said.

* 1991 CAR SALES SLUMP

Sales of 1991 cars and trucks fell to 12.75 million, the lowest level since 1983. D5

Declining Dealership Dollars

After strong growth in the mid 1980’s, dealership car sales have slowed considerably. New car sales have dipped slightly, while sales of used cars have risen. The secession is to blame. All dollar figures are in millions.

Source: Automotive Executive Magazine