Car dealers worry price hikes will nip sales '82s

All the car rebates and financing "come-ons" offered by manufacturers over the last few months did have a notice-able effect. Though less impressive in September, sales of cars manufactured in this country shot up an impressive 24 percent in August.

But many car dealers are now concerned that, without further help from manufacturers and a consumer willingness to accept the 5 to 7 percent price increase on 1982 models, selling cars could get considerably tougher over the next few months.

"We're afraid that sales may come to screeching halt when all '81s are sold," confirms Penelope Longbottom, a spokeswoman for the National Automobile Dealers association (NADA).

"The prices and financing are going to be up together, and for a lot of people that's going to be quite a shock," says George Irvin, a Denver dealer who sells Chevrolets, Mercedes-Benz, BMWs, and Subarus. He says he thinks there is an "extreme danger" that more dealers could go under in months to come. Dealer ranks have already been thinned by 10 percent over the last two years.

Many new car dealers have managed to stay in business only by considerable belt tightening, more aggressive salesmanship, and the ability to offer manufacturer discounts, many of which have been extended into October.

For many, selling used cars has turned into the most profitable part of the business. Most dealers traditionally take trade-ins on new buys, but many dealers now also buy and sell at auctions and telephone those advertising in newspapers. Indeed, 1980-81 used cars have been selling so briskly that some dealers feel the limited supply left may push prices up still further.

To stay afloat many dealers have also sharply trimmed expenses. Some have cut back on the number of employees, kept inventories at lower levels, and consolidated ranks to involve imports and domestic cars, at least one Colorado dealership handles both Fords and Chryslers. Most dealers also say each sale takes a lot more work than it used to.

"We're all working 10 times harder -- no question about it," insists one Chevrolet dealer in a Northwest Chicago suburb. "The customer is much tougher -- he used to come in with a smile but no more -- and he's much more price-resistant than he used to be."

Dealers say they are convinced that high prices and high interest rates are responsible for the bulk of their sales problems. They say that many shoppers mistakenly think they must pay the prime rate on car loans and are "scared off."

"The problem is really the prime rate, and the effects are very widespread," insists John Ferron, executive director of research and operations at the NADA. "There aren't any gimmicks [that will counter it]. It takes good management, quality service, and doing a lot of little things right to survive."

Manufacturer production of 1982 model is not that heavy, and most dealers have been cautious in the numbers they order. Many will launch a strong merchandising effort for the new models but say they think it will take more than simple salesmanship to move them.

"It's going to take a drying-up of all other alternatives or a very strong manufacturer support program," says Richard Wagner, a Ford, Peugeot, and Datsun dealer in Simsbury, Conn.

So far this year only 350 dealerships have closed compared with about 1,600 during 1980. The concern is that the number closing down could pick up sharply during the last quarter of 1981. Accordingly, dealers are working as hard as they can to fan the rumors that manufacturers may yet come through with further sales incentives.

"Usually dealers start taking about the idea," says Mr. Wagner. "Sometimes it filters through to the manufacturer to the point where he gets the idea and starts implementing it."

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.