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Car dealers getting pleasant year-end bonus

Car dealers getting pleasant year-end bonus

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DETROIT — Car dealers are getting a surprise end-of-the-year bonus: More Americans are replacing old cars and trucks, enlivening a normally sleepy time for auto sales and putting November on track to be the industry’s strongest month of the year.

Dealers and analysts say people are finally getting rid of cars and trucks they’ve held onto for more than a decade. That demand, plus attractive lease deals, an ample supply of Japanese models and promotions on remaining 2011 models have drawn buyers to showrooms in large numbers the last two weeks.

“We’re seeing the most showroom traffic that we’ve seen all year,” said Ed Williamson, part-owner of two Miami-area GM Buick-Cadillac-GMC dealerships.

The spike in activity comes after months of sputtering sales. Consumers have been reluctant to take on major debt such as car payments because of the uncertain job market. Unemployment has been around 9 percent for more than two years with no sign of significant improvement.

Sales also suffered when Honda Motor Co. and Toyota Motor Corp. ran short of models during the summer and early fall because of factory disruptions caused by the earthquake in Japan and flooding in Thailand.

Now supplies are starting to return to normal, and customers have a better selection.

So far this year, sales have been better than 2010, an annual rate of 12.6 million compared with 11.5 million, but that’s still far short of the 2005 peak of 17 million.

Recent sales have been so strong that General Motors’ top sales executive predicts that November figures will hit an annual rate of around 13.8 million light vehicles in the U.S. That’s a big step up from last November, when the auto industry was just starting to recover from the economic meltdown. Back then, the sales rate was only 12.3 million.

After years of holding off on purchases, people are tiring of their old cars and trucks. So despite a volatile stock market, high unemployment and worries that the European debt crisis could destabilize the global financial system, people are buying, said Jesse Toprak, vice president of industry trends for the auto pricing website.

The average age of a car on U.S. roads is now a record 10.6 years, according to the Polk auto industry research firm. Vehicles are so old that people’s lives have changed and they need different models, or their cars are just worn out, he said.

“They just simply couldn’t wait any longer,” he said.

In Houston, physician David Vener was among those who kept an old car for a long time. But he parted Monday with his 1999 Lexus sport utility vehicle, which had 135,000 miles. He traded it in at River Oaks Jeep for a new Grand Cherokee.

The Lexus, he said, had been almost trouble-free for the last 13 years, but it was facing some expensive repairs. Also, it didn’t have side air bags and other safety features that newer cars have, he said.

“After three teenage boys and a lot of miles, it was beginning to show its wear and tear,” Vener said. “It was getting a little long in the tooth.”

Lease deals also are drawing people into showrooms, Toprak said, with November leases approaching an annual high. Leases had been just above 20 percent of the U.S. market during the year, but this month they’re running about 25 percent.

Low interest rates and strong resale values after leases have ended help car companies offer deals.

This month, GM has deals that require no money down. A Cadillac CTS luxury sports sedan is leasing for $399 per month, down from $429 to $439 in October, Williamson said.

Also, dealers are clearing out the remaining 2011 models. And by this time of year, automakers normally offer good discounts to get them sold. Numerous 2012 models are attracting buyers, too, Toprak said.

But even the usual discounts on older models don’t normally bring out so many customers in November, when sales nearly always slow down as temperatures drop and people get caught up in the holidays.

Don Johnson, vice president of sales for General Motors Corp., told industry analysts Tuesday that recent data show some strengthening in the U.S. economy.

“We continue to believe that the industry will grow,” Johnson said. “It will grow slowly with the economy.”

At Chuck Eddy Jr.’s Chrysler-Dodge-Jeep-Ram and Fiat dealership near Youngstown, Ohio, November sales are on pace to beat October, when Eddy sold 95 new cars and trucks.

“I’m on track to do 125, 130 this month,” Eddy said. That will be “the biggest November I’ve ever had.”

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