Car Profit Up Since Recession October 2010

October 2010

Northwest Arkansas car dealership’s sales are rebounding from the recession due to aggressive marketing and incentives by national car manufacturers.

Arkansas dealerships and car manufacturers are taking steps to minimize loss and maximize profits; such steps have slowly increased the profits of the car market since the recession began in December 2007.

Manufactures such as Toyota Motor Corp., Ford Motor Co., and Chrysler Group LLC., have put on aggressive marketing campaigns, offered incentives, low-interest rates and rebates to keep customers coming in.

The manufacturers are taking the steps to get people to keep buying cars, according to Chris Everitt, sales manager at Fayetteville Auto Park. “Year-end incentives are huge right now and interest rates are as low as I’ve seen in my seven years with my company,” Everitt said.

According to some dealerships in Northwest Arkansas, now is in fact a better time to buy cars than before the recession, because manufacturers are doing their best to keep customers.

However, a downside to buying a car today is that since the start of the recession banks are giving out fewer loans because of the poor credit market.

One such customer, who has run into problems with the credit market is 21-year-old Candace Prince of Rogers. Prince is looking to buy her first car with low monthly payments, low-interest rates, reliability, and better gas mileage than her previous car.

“Arvest and other banks are less willing to loan me money now as opposed to when my Dad bought me my car in April 2007,” Prince said. “Back then it was really easy for me to get a loan for my car, but now it is really hard for me to get one,” Prince added.

Getting a loan, especially for people her age is no easy task, according to Prince. “It is hard to get a loan period, but it’s even harder when banks know you do not have a set income and that your parents still support you,” Prince said.

The Car Allowance Rebate System, also known as “cash for clunkers”, set up by the federal government last summer was designed to help both customers and dealerships alike. The program was a government incentive program designed to stimulate the economy by boosting auto sales while removing poor fuel economy cars off the road.

The program ran from late July to late August last year. Some dealerships credit this program with keeping them afloat in a sinking economy and stimulating business.

“We had a major up take in business and brought in major capital. In my opinion it got the economy and factories rolling. We ran out of cars,” said Russ Daniel, General Manager for Landers McLarty Ford, Chrysler, Dodge, Jeep in Bentonville. “The only drawback was there was a decline in the used car market because the government destroyed the trade in cars,” Daniel added.

According to Daniels, business was up year over year by 40 percent during the “cash for clunkers” program at the dealership. Although, Glenn Gibbs, sales manager at Landers McLarty Jeep, said that the program was good deal for costumers, but not for dealerships because it had little impact on the overall years’ business.

According to a report by the Department of Transportation, the program resulted in 690,114 dealer transactions submitted, requesting a total of $2.8 billion in rebates. By the end of the program, Toyota accounted for 19.4 percent of sales, followed by General Motors Corp. with 17.6 percent, and Ford with 14.4 percent.

In fact, auto registrations in Arkansas were down 23 percent in September 2010 compared with a year earlier, according to an automotive research firm. The numbers from September 2009 were hard to match for because of the “cash for clunkers” program, which brought in a lot of revenue for dealerships across the nation and in Arkansas last year.

Things are looking up for car manufacturers and super dealerships. Even with the shutting down of two dozen dealerships in Arkansas, because of orders from Chrysler and General Motors, both of which declared bankruptcy last year, car sales are steadily on the incline for larger automobile dealerships.

Most of the dealerships that have closed in Arkansas since 2008 were smaller dealerships and sold domestic brands, like Cook Jeep Chrysler in Little Rock, who have now gone into partnership with Little Rock Chrysler Dodge Jeep, owned by Steve Landers.

At Toyota of Northwest Arkansas, a big dealership in the area, sales are about average, according to Tray Wright, business manager at Toyota of Northwest Arkansas. “We have some hot weeks and some slow weeks, but we are running about the same every month,” Wright said.

Chrysler reported on Nov. 8, that free cash flow will be up about $500 million from negative $1 billion. According to Autodata Corp., a research firm, Chrysler’s domestic sales are up 20 percent compared with last year. General Motors also reported on Nov. 10, a $2 billion quarterly stock profit ahead of stock offering.

General sales in Arkansas by the end of the year will be up close to 20 percent over 2009, according to Dennis Jungmeyer, president of the Arkansas Automobile Dealers Association.