Coming soon: the big auto sell-off

Last year, General Motors came up with the idea of selling cars at "employee pricing," or the amount it would sell the car to its own workers. The company dramatically increased its selling rate, and inventories shrank.

But this summer, as fuel prices spiked, consumers shied away from buying big SUVs. Even though gasoline prices have come down, consumers are skeptical. "People think the price of gasoline is going to go up again after the election," says Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. "So they are staying away from big SUVs."

Automobile analysts are anticipating deeper discounts to help reduce inventories of cars and trucks that are not selling well. Today, according to Automotive News, cash-back incentives range from $500 for a Dodge Durango to $6,000 on some Chevrolet Suburban and Tahoe models. Most of the companies have some form of 0 percent interest-rate plan.

Starting next month, those discounts are likely to improve, especially for the 2006 models, says Jack Nerad, executive editorial director at Kelley Blue Book in Irvine, Calif. "They will also offer lower interest rates to a much broader group of consumers than previously qualified, and offer longer loan terms," he says.

Chrysler may have some of the best deals since it has the largest inventory.

"They kept the production spigot on and didn't care that sales were slowing down," says Mr. Nerad. "I would expect them to do something serious and pretty soon."

Dealers, of course, will be happy to move cars off their lots. Grant Law of Newton Chevrolet in Chattanooga, Tenn., says showroom traffic has been a little slower than he would like. He thinks it might be related to the tight political race in the state between Rep. Harold Ford (D) and Republican Bob Corker, a former mayor of Chattanooga. "It's consuming a lot of folks' minds," he says.

Deeper rebates from Detroit will especially help buyers without a lot of cash, says Mr. Law. "But we find the lower interest rates bring in the higher-quality customer," he adds.

While domestic manufacturers are struggling, dealerships that sell imports are thriving. For example, in Huntsville, Ala., Bill Penney Toyota's biggest problem is getting enough cars. Jerre Penney, president of the dealership, says he is operating on a 10-day inventory. Camry hybrids are the most difficult car for him to come by. "I have sold five of them that I am now trying to obtain," he says.

But even the domestic car manufacturers have some "hot models." For example, Chuck Van Stone of Shepherdstown, W.Va., is in the market to buy a 2007 Dodge Caliber, which looks like a station wagon but has all-wheel drive. It sells for $22,000. "When you make an exciting car and it captures a buyer's imagination, you don't need to discount it," says Mr. Van Stone. "Right now, there is no discount for that car."

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