2008: Year of the Used Car? Local auto dealers see shift in sales

Traverse City – Overall car and truck sales were down 35 percent July-September in Traverse City, according to industry numbers compiled by the TCBN.

But you won't find local dealers driving off a cliff, particularly those dealers who specialize in used car sales.

Our annual snapshot of local automotive sales shows that while new car and truck sales were down 20 percent for the third quarter, used car sales actually posted a slight gain versus 2007.

Dealers typically earn a much higher profit by selling used versus new.

"As times get tough, the used car business always gets better," said Cherry Capital Cadillac/Subaru and Traverse Motors Owner Otto Belovich, who says his dealerships are on-pace to have an "excellent year."

The decline in new vehicle sales is a national trend, as manufacturers face a consumer with less disposable income, challenges with home values and job security, and a tightening credit market.

Automotive expert David Cole, whose Center for Automotive Research is the leader in identifying and studying trends in the industry, told the TCBN that a transition to used cars is natural as tough times "cause the consumer to freeze, and then shift their horizon to options they weren't forced to consider before."

The news has some dealers finding pockets of good news amidst the bad (See interviews with area dealers on page 7). One thing all local dealers agree on is that northern Michigan continues to be largely insulated from the massive sales declines and dealer closings that have hit metro Detroit so hard.

"I will say we are very fortunate to be in Traverse City, Michigan right now," said Mike Marsh. "I know from conversations with dealers elsewhere that we are much better off here."

Craig Wares, whose dealership only sells used cars, said, "What we're seeing is people that normally have been leasing, and as leasing has been getting shut down, they're exploring an affordable payment range that puts them in used cars."

Wares' sales posted a 14 percent gain in the third quarter.

In the new car realm, the area's strong appetite for the low-cost Kia brand continues. Three of the four best-selling vehicles in town are Kias.

In fact, cars and trucks from the Traverse City-based Williams dealerships accounted for six of the top ten best sellers in the third quarter, including Kia, Chevy, and Honda models.

Yet the news was not all rosy for the new car volume leader. Though Williams' new car sales still top their competitors', the group posted the steepest sales decline in the third quarter, dropping 24 percent versus last year.

Auto expert Cole says the landscape could be changing again soon, as manufacturers look to eliminate incentives and GM and Chrysler talk about a possible merger.

"The manufacturers will have pricing power they haven't had in 10 years or so. You will see major prices increases in the next couple of years. And when consumers see it coming, new car sales will catch up. Consumers will realize they will pay more for new cars the longer they wait." BN