Drop in Fee Sends Buyers Back to Auto Showrooms

New-car sales in the state jumped dramatically after Gov. Arnold Schwarzenegger reversed an unpopular increase in vehicle registration fees, according to data released Thursday by J.D. Power & Associates.

California’s car dealers were major supporters of Schwarzenegger’s election bid, and they have seen automobile sales in the state rebound since Schwarzenegger kept his promise to rescind the fee hike on his first day in office.

J.D. Power, a Westlake Village market research firm, said sales of new passenger vehicles rose 19% between Schwarzenegger’s Nov. 17 inauguration and Dec. 28.

That compares with a 30% sales plunge from Oct. 1, when the registration fee increase took effect, through Nov. 16, the last day that former Gov. Gray Davis held office. Davis ordered the fee increase, which tripled the cost of most vehicle registrations, to help plug a gaping state budget deficit.

Political analysts say the registration fee hike contributed to the overwhelming vote to recall Davis last year.

J.D. Power data analyst Tom Libby said the effect of Schwarzenegger’s order to reduce the fees could be seen most clearly in the luxury car segment. Sales of luxury cars, the most expensive to register because fees are based on sales prices, have risen 30% since the rollback, he said.

The study covers sales from Nov. 17 to Dec. 28 and is based on sales reported to J.D. Power by hundreds of car dealers in major California markets.

The higher fees weren’t the only reason for the October-November decline, Libby said. Californians “were also preoccupied with major wildfires and a high-visibility gubernatorial recall election” during the period, he said.

But auto dealers say they heard loudly and clearly from consumers that the rate hikes were a major reason they stopped buying in the weeks before Schwarzenegger was sworn in.

“That’s the big reason,” said Fritz Hitchcock, whose Hitchcock Automotive Resources owns seven Southern California dealerships.

Once the rates were rolled back, car buying picked up.

“We’ve seen sales rebound significantly, to the point where they’re on par with the other 49 states,” Libby said.

Power’s sales data show that new-car sales were down 15% in the rest of the nation from Oct. 1 to Nov. 16 and fell an additional 2% from Nov. 17 to Dec. 28.