Cash Or Credit, Car Deals Abound

Most people are putting off big purchases during the recession — especially cars. Dealers are trying to change that with what analysts say are some of the lowest prices in a long time. But all those rebates and discounts have yet to re-kindle the market.

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Cars especially are among the big purchases that people are putting off during this recession. Dealers are trying to change that with some of the lowest prices in a long time. But all those rebates and discounts have yet to rekindle the market, as NPR's Frank Langfitt reports.

(Soundbite of papers rustling in wind)

FRANK LANGFITT: It's a blustery day at Springfield Ford outside Philadelphia. The wind rips through the plastic colored flags that line the parking lot. Steve Amabile is the sales manager here and he's pitching me some of his best deals. We come upon a 2009 Ford Fusion. It's a midsize sedan that competes with the Toyota Camry and Honda Accord.

Mr. STEVE AMABILE (Sales Manager, Springfield Ford): This particular car here is what's most people would consider to be fully loaded - a $25,000 car, leather and sunroof and all that good stuff - and you're looking at a sub-$20,000 car by the time it's all said and done.

LANGFITT: I'm not expert on pricing, so I brought along John Giamalbo(ph). He's an analyst with Edmunds.com, the consumer car Web site.

Now, John, is that a good deal?

Mr. JOHN GIAMALBO (Analyst, Edmunds.com): It is a good deal. It's a brand new car, and get a vehicle like this in this segment for that price, it is a very good deal.

LANGFITT: And, Giamalbo says, not unusual. He says prices are lower than they've been in years, and now is a good time to buy. Most consumers are still too worried about the economy to jump in. In March, General Motors' sales were down 45 percent from a year ago; Chrysler's were down 39 percent; and Ford, down 41 percent.

But Amabile says his dealership is getting some traction.

Let's say I have no money and I'm a totally economic buyer. Is there a really cheaper Fusion here to look at?

Mr. AMABILE: It's gone already. They're out there. It's the S model, and you can buy one of them for around 15 grand.

LANGFITT: But how does a dealership make money when it sells cars for so little? Amabile says it helps to understand the business strategy. The dealership actually makes more selling a used car than it does a new one.

Mr. AMABILE: When we sell a new vehicle, we might only make a couple hundred dollars on a new vehicle, which would be surprising to some people.

LANGFITT: But Amabile can recondition a trade-in and sell it for a profit of about $2,500. Despite the recession, Amabile says that strategy is working and Springfield Ford is holding its own.

But it's not just Detroit companies that are cutting prices. I went a little ways up the road to Conshohocken. I'm now at Conicelli Toyota, and I'm walking through the lot and they're offering deals on just about everything they've got here, and that includes the Prius.

Dom Conicelli owns the dealership, which is also in the Philadelphia suburbs. Last year, he says, customers had to sign up to buy a Prius.

Mr. DOM CONICELLI (Owner, Conicelli Toyota): When the gas prices were extremely high, we had a backlog of customers that were waiting. You know, we had a line of people waiting and...

LANGFITT: How long was the line?

Mr. CONICELLI: We were probably back a month.

LANGFITT: Not anymore. Gas is now down around $2 a gallon, Priuses line the parking lot, and Conicelli is reducing prices to move them.

Mr. CONICELLI: To have a thousand dollar rebate on the Prius is really unusual. That's never happened before.

LANGFITT: And that rebate comes on top of a more than $3,000 discount.

If I wanted to drive out of here today in the cheapest Prius, what could I walk out with?

Mr. CONICELLI: I would think that you could see one somewhere around $23,000, maybe a little bit less.

LANGFITT: John Giamalbo of Edmunds.com says that price highlights an inconvenient truth about hybrids. Sales are driven far more by gas prices than by concern about carbon emissions.

Mr. GIAMALBO: I think people worry more about the green in their pocket when gas prices are that high, as opposed to the green in the environment.

LANGFITT: As to the future of car sales during this recession, some dealers are pinning their hopes on rust. Each year people scrap about 13 million cars in America. So, the thinking goes, people will have to start buying eventually, whether they like it or not.

Frank Langfitt, NPR News, Washington.

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Car Deals Abound With Drop In Demand

The recession has sapped demand for cars, so now may be a good time to think about buying one. Industry experts say prices for many vehicles are lower than they've been in years.

"There are just an incredible amount of deals," says Jessica Caldwell, an analyst for Edmunds.com, a Web site for car buyers. "It doesn't matter what vehicle you're looking for, or what brand you're looking for. We're seeing finance deals for Bentleys."

But all those deals have yet to send customers stampeding to the showrooms.

In March, overall vehicle sales were down 37 percent from the same period in 2008.

Consumer Anxiety

Dealers say the problem is not so much financing as consumer anxiety.

And that's pushing dealers to cut prices on all kinds of cars and trucks.

Abbas Khademi is the general manager at Ourisman Chevrolet in Marlow Heights, Md., just outside Washington, D.C. He's selling a Chevy Cobalt coupe for just under $9,000. The sticker price is around $15,000, but Khademi says there are a variety of programs, including rebates and bonus cash, that bring the price down.

"To be honest with you, we're just trying to sell some cars," says Khademi.

The Cobalt is not a hot seller, even in good times. But Khademi is even cutting prices on popular cars, like the redesigned Chevy Malibu, a sleek sedan that won the distinction of 2008 North American Car of the Year.

"Two years ago, we were not even barely discounting the car," Khademi says of the Malibu, which lists for more than $22,000. "We have those now on sale for $14,300."

There is a small catch: To get that price, you have to trade in a vehicle that isn't made by GM. Otherwise, you have to pay an extra $1,000.

Khademi says he's losing money on deals like this, but hopes to make it up in his service bays.

"We sell you the new car, you come back, you use our service department and then when you need another car — for your family, for your neighbor, for your friends, for your parents — you can recommend us," he says.

Profits From Service

Despite what you might think, dealerships don't make their big money on new car sales. Khademi says 75 percent of the profits at Ourisman come from service, parts and repair.

But to make that business strategy work, Khademi has to first sell new cars, and some of the prices aren't as low as some people expect.

Nelson White recently came into the dealership looking to spend about $25,000 on a Chevy Traverse, a crossover model. White has a second child on the way and needs a vehicle that can take two car seats comfortably.

Ourisman's price was $30,000. White was tentative about it: "It's an OK deal," he said. "It's not as sweet as I thought it would be, but it's OK."

Pacing The Floor

Ourisman is happy to have shoppers like White. The phone rarely rings in the showroom, and salesmen spend most of their time pacing the floor with their hands stuffed in their pockets.

Henry Marin, who handles finance for the dealership, says one reason more people aren't buying is because they want to see if GM will collapse — and perhaps cause prices to fall even further.

"They're waiting for the bankruptcy," he says. Marin says he tells customers that the process isn't going to be like a small business going bankrupt and "selling everything at 50 percent, 60 percent or 70 percent off."

Fortunately for the dealership, there are still customers like Carl Little Jr., a plumber who drives a five-year-old Chevy Silverado pickup.

Little was lured to the showroom by a newspaper ad that offered trucks for as low as $13,500. With extras, he thinks he can get a new Silverado for as little as $22,000.

"I think they'll work a deal with me," he says, confidently. "I think we'll be able to work something out."

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