Auto Sales Decline Amid Credit Woes
STEVE INSKEEP, host:
The trouble in the housing and mortgage markets is spilling over into new car sales. Retail sales of new vehicles may sink as much as 10 percent this year. Domestic automakers are being hit the hardest, but they're not the only ones, as NPR's Wendy Kaufman reports.
WENDY KAUFMAN: One man who's paying close attention to declining auto sales is Mike Jackson, the CEO of AutoNation. With 270 dealers, his publicly traded Fortune 500 company is the largest new car retailer in the U.S.
Mr. MICHAEL JACKSON (Chairman and CEO, AutoNation): Traffic is way down compared to prior years. People simply aren't coming in. They're sitting at home at their kitchen table and looking at their budget and seeing that, forget gas prices, what's happening to their mortgages, what's happening to the value of their home, has not put them in the mood to go out and make a big long-term commitment.
KAUFMAN: Industry analysts say overall vehicle sales are off about three percent for the year. But when you take out corporate and fleet sales, the picture is bleaker, with some industry watchers predicting a double-digit drop in 2007.
Dealers in California and Florida have seen some of the biggest slides in new car sales. Housing prices in those states have tumbled. Art Spinella of CNW Marketing Research, a major tracker of auto buying trends, says lots of Californians and Floridians use the equity in their home to get a car loan. Now their equity has fallen, and so has their ability to get financing.
Mr. ART SPINELLA (CNW Marketing Research): In California about a third of all of the new cars that are bought with some sort of a home equity loan or line of credit. Florida, at one point, only a couple of percentage points of new car sales were done that way. But Florida now is in the mid-teens.
KAUFMAN: Together, California and Florida account for roughly one in five new cars sold. Across the country, adjustable rate mortgages have gone up, increasing monthly payments. And after years of easy credit, credit standards have gotten tighter.
In a nationwide survey done by Spinella's firm, nearly 18 percent of those queried said home-related financial issues kept them from buying a new vehicle. Another 11 percent cited their credit score.
Spinella's prediction of 16.3 million vehicles sold this year is one of the most optimistic, but it's still far less than the 16.8 million sold last year.
Mr. SPINELLA: It looked a couple of years ago as if the industry would never drop below 16.9 or almost 17 million.
KAUFMAN: Domestic automakers are having a tougher time than foreign companies. But Eric Merkle, a forecaster at the automotive consulting firm IRN, says if you look at July sales, the problems went across the board.
Mr. ERIC MERKLE (Analyst, IRN): If you take a look at Toyota, Toyota was down some seven or eight percent. Honda was off about seven percent. So it was really coming not just from, say, the traditional GM and Ford, but it started coming from more of the stronger players as well.
KAUFMAN: The consensus of experts is that auto sales could fall further behind before they rebound. And they suggest that the turnaround won't occur until well into 2008. If there is a silver lining, it comes from industry analyst Jesse Toprak at Edmunds.com.
Mr. JESSE TOPRAK (Analyst, Edmunds.com): If you are in the market for a new car, I have some great news because this is a great time to buy.
KAUFMAN: There's a lot of inventory, and dealers and manufacturers are offering attractive incentives. In short, Toprak says, it's a buyer's market.
Wendy Kaufman, NPR News.