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Deals abound on luxury used cars

Jennifer Saranow
Wall Street Journal
Aug. 11, 2005 11:08 AM

It is a good time to buy a used car.
The popularity of Detroit's "employee pricing" deals on new vehicles is causing a domino effect, sending prices on used cars - including some used luxury models and many sport-utility vehicles - to the lowest levels in at least two years.
In recent months, auto makers including General Motors Corp., DaimlerChrysler AG and Ford Motor Co., have revived their lackluster U.S. sales by giving all buyers discounts previously reserved only for their staff. The resulting surge in new-car sales - In July, auto makers recorded their third-best sales month in history - has triggered a corresponding jump in trade-ins. advertisement
The upshot: a glut of used cars, resulting in falling prices on brands such as Saab, Cadillac and Lincoln. Dealers nationwide in July had about 120,000 more used-car trade-ins on their lots than they would have had if new-car sales hadn't jumped, according to the National Automobile Dealers Association. At the end of July, Ford says its dealers had 37,000 used cars on their lots, up 30 percent from June.
Some of the biggest price drops are showing up on 2005 and 2004 model-year cars for a simple reason: Dealers suddenly are having to price them lower so they aren't competing directly with the employee prices of new vehicles, says Bob Kain, vice president of Jack Kain Ford Inc. in Versailles, Ky. Another factor helping to drive down used-car prices is the fact that the employee-pricing discounts are encouraging many shoppers who might have otherwise bought a used car to purchase a new one instead, drying up the available pool of customers.
For consumers, the oversupply of used vehicles translates to savings of anywhere from a couple of hundred dollars to as much as a few thousand dollars off used-vehicle prices, compared with a similar vehicle a few months ago. At Saab of Santa Ana, in California, a 2004 Saab 9-3 sports car with 15,000 miles now is listed at $19,900, about $500 less than it would have been before employee pricing, according to salesman Chad Clarke. Saab is owned by GM and is part of the employee-discount program. The price of a used 2004 Chrysler Pacifica wagon has fallen about $600 in recent months, according to Kelley Blue Book, the pricing guide.
Of course, used-car prices always decline with the passage of time - usually about 1 percent to 3 percent every two months, according to Kelley Blue Book. However, the current rate of decline on some models is considerably faster than that.
Generally speaking, buyers should expect used-car prices to decrease by the amount of incentive being offered on the new version, says John Symes, president of Symes Automotive Group in Pasadena, Calif. At his dealerships, which sell Cadillac and Saab vehicles among other brands, retail prices for late-model used vehicles have fallen on average 10 percent to 20 percent since May, in cases where there is an employee discount in place on the new version of the same model.
Overall, used-car prices have fallen at least 5 percent from May to July, according to Paul Taylor, chief economist with the National Automobile Dealers Association. He estimates that prices could fall a further 3 percent this month. The weakening of used-car prices this summer is a reversal; in the past two years, prices had been rising steadily (after declining in the aftermath of the 2001 terror attacks) as the economy has improved.
The best bargains generally can be found on domestic vehicles - in particular, ones with the most generous employee-pricing deals. Still, industry watchers say the used-car market has softened across the board, even for imports such as BMW that have avoided heavy discounting. This means used prices across other brands either are dropping as well or not rising as much as they were expected to.
Because of the strong downward pressure from the domestic discounts, some dealers are cutting prices on all their used cars. At Saybrook Ford in Old Saybrook, Conn., for example, every used car is about $2,000 lower than before employee pricing, on average, including BMWs. "We have to make all used cars very appealing right now," says General Manager Ted Vecchiarino.
At Gartner Buick Hyundai Saab dealerships in suburban Chicago, used-car prices are down across the board, about 10 percent on the low end and as much as 20 percent on SUVs.
The steepest discounts tend to be for SUVs and other large vehicles such as the GMC Yukon and Ford Expedition, which hadn't been selling well amid rising gasoline prices, as well as older models such as the Ford Explorer that are being revamped for 2006.
At Kerbeck Cadillac Chevrolet in Atlantic City, N.J., for instance, a 2003 Cadillac Escalade base model with 20,000 miles runs about $39,000 now, down from $42,000 to $43,000 before employee pricing, says Ed Keller, Cadillac sales manager at the dealership.
Finding the best price on a specific used model can be tricky, because individual dealers set prices and they can vary widely. Prices have declined the most at franchise dealers, which have seen the greatest surge in trade-ins. According to CNW Marketing Research, prices of used vehicles at franchise dealers fell nearly 10 percent in July, compared with flat prices at independent dealers.
According to J.D. Power & Associates' Power Information Network, brands whose average used-car transaction price at a new-vehicle dealership declined in July from June include Chevrolet, Dodge, Jeep and Saab as well as Asian brands such as Honda, Acura and Suzuki. At Manheim Auctions - a major used-car auction where dealers buy and sell for their lots - prices for large pickups fell 9 percent from April to July and large-SUV prices slid 7.5 percent in the same period. Luxury-car prices fell 2.8 percent.
General Motors says it saw a "blip" downward in its used-car price in June, primarily because rental companies update their fleets with new cars at midyear, which means an influx of their older vehicles into the used-car market. GM also expects July and August prices to be flat or higher because of depleted inventories and strong demand. "I would say the blip is pretty temporary, and it was more so in June than we've seen since then," says Paul Ballew, executive director for market and industry analysis at GM.
Last week Detroit's Big Three said they would be continuing their employee-pricing deals. Ford, which extended its employee pricing to a number of 2006 SUV, pickup and van models, said its deals would run into early September, as did rival GM. DaimlerChrysler's Chrysler Group said it will continue its employee pricing for 2005 models indefinitely.

Used car market offers many choices
By BARBARA WOLLER
THE JOURNAL NEWS
(Original Publication: August 19, 2005)

People trading in vehicles to take advantage of auto makers' "employee discount" incentives has led to an abundance of used cars that is translating into lower prices on some models, but not all.

Overall, prices dropped 1.4 percent in the past 12 months ending in June, said Santa Monica, Calif.-based Edmunds.com, which publishes pricing guides for new and used vehicles on the Web. But data generally show that larger vehicle prices have fallen in the past year while smaller cars have risen.

The price of so-called "premium compact cars" such as the Chevrolet Cavalier, Dodge Neon and Ford Focus, for example, has increased 5.1 percent at dealerships because of high gasoline prices, said Alex Rosten, manager of pricing and market analysis for Edmunds.com. People want the smaller cars that give better mileage, he said.

The base retail price for used large sports utility vehicles sold by dealerships has gone down 4.9 percent, however. Large SUVs include the Ford Expedition, the Chevrolet Suburban and the Lexus GX.

Consumer Reports said on its Web site that now is a good time to buy a used car because of "over-supply, low interest rates and easy credit. ... The used-car market (has) a glut of quality, pre-owned vehicles."

General Motors started the rush to clear its showrooms of cars to make room for the 2006 models when it introduced the employee discounts on most of its 2005 models for all customers in June. It was joined by Ford and DaimlerChrysler in July.

About 60 percent of current used cars for sale were trade-ins at one of the Big 3 dealerships, said Paul Taylor, chief economist for the National Automobile Dealers Association.

"We have a strong volume of used cars in the marketplace," he said.

In the region, "used-car sales are very strong and prices are steady," said Mark Scheinberg, president of the Greater New York Automobile Dealers Association, which represents 650 franchised dealers, including about 125 in the northern suburbs.

"I think that's because there's a lot of low-mileage vehicles out there," Scheinberg said. "It seems consumers are looking for things that are reasonable but still want a quality auto that doesn't have problems."

Jairo Glen a termite inspector from Elmsford, likes buying used cars. He bought a 1992 325 BMW for $8,000 in a private sale a month ago.

"I'm happy even if it lasts me three years it's worth it," Glen said.

Glen said he avoids new cars because their value dips dramatically once its driven off the lot. "So you'll save 30 percent to 40 percent off the bat."

Gary Nightingale, owner of A Motor Sales, a Jeep/Chrysler dealership in Spring Valley, said he has more used cars than usual to offer customers, and his used-car sales are up more than 30 percent.

"If you're a consumer and are going to buy a used car the prices are very good," said Dwight McGuirk, the owner of Smith Cairns Ford Lincoln Mercury of Mount Kisco and four other dealerships in Westchester and Putnam counties. "We want to sell them," he said. "We don't want them hanging around for too long."

Jordan Wright, general manager of Quality Ford in Mount Vernon said his used car sales are flat even though his new car sales are up 30 percent. "They've been steady," Wright said. "They haven't gone up and they have not decreased."

Robert Conti, general manager of Curry Chevrolet in Greenburgh, said sales of used cars have been up 20 percent at his dealership.

"August has dipped a little," he said, "but there still are good buys out there."

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WASHINGTON (AFP) - US auto sales sputtered in August as the impact of General Motors' popular employee discount program started to fade, allowing Asian manufacturers to grab more market share, industry figures showed.
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Overall US sales for August edged up 3.8 percent from a year ago to 1,483,703 vehicles, according to market research firm Autodata Corp.

Much of the gains came from Asian automakers, with Toyota and Nissan reporting their best August sales and Honda posting an all-time monthly sales record. South Korea's Hyundai and its Kia affiliate also posted solid gains and increased market share.

GM reported a 16 percent decline in August sales compared with a year ago, while Ford and DaimlerChrysler modest increases of 6.3 percent and five percent, respectively.

But the figures were disappointing for the Detroit Big Three, which have slashed prices by offering employee-level discounts to spark sales.

The US automaker reports "are a little disappointing relative to expectations," said Dana Johnson, chief economist at Detroit's Comerica Bank.

"People thought Chrysler and Ford would show bigger increases and that GM would show a smaller decline. What is happening is the power of the incentives is wearing off."

GM said its sales of 355,180 vehicles was in line with expectations following a 20 percent jump in July and a 41 percent surge in June spurred by the popular employee discount program.

"We knew August was going to be a tough month, given extremely tight inventories," said Mark LaNeve, GM North America vice president.

"However, even with August sales, it's been a great summer for us."

Ford sales totaled 288,429 for the month, compared with 271,394 in August 2004. Most of that came from new passenger car models, which helped offset a 33 percent drop in sales of traditional sport utility models.

DaimlerChrysler said the Chrysler Group, which includes the US-based Chrysler, Jeep and Dodge brands, accounted for 187,085 vehicles, up five percent. But adjusted for one more selling day in August, the increase was just one percent.

GM's market share slipped to 23.4 percent from 28.6 percent last month. Ford and DaimlerChrysler also saw market share erode compared to a month earlier.

Toyota meanwhile outpaced DaimlerChrysler by selling 205,362 vehicles, an increase of 9.5 percent, saying that customers were drawn to its more fuel-efficient vehicles despite heavy discounts from US rivals. Toyota lifted its US market share to 13.8 percent, ahead of DaimelrChrysler's 12.6 percent.

"Even as the impact of employee pricing wanes and pump prices climb, the industry presses ahead on the strength of new products and hybrid technology," said Jim Press, Toyota's top US executive.

American Honda said sales increased 18.6 percent to an all-time record 156,173 vehicles, showing increases in hybrid cars, the luxury Acura nameplate and its range of sedans and SUVs.

Nissan North America reported a 10.6 percent increase to 92,365 total sales.

With a nine percent sales jump, Hyundai boosted its market share to 2.8 percent and Kia's share rose to 1.6 percent after increases sales by 12.7 percent.

Rebecca Lindland at the research firm Global Insight said the Japanese automakers have a better product lineup now but that Detroit automakers are using the incentives to buy time.

"I think the strategy (of employee pricing) was short-term -- they needed to clear out inventory and they did that," she said.

Mike Chung at Edmunds.com said GM is improving the fuel economy of its large trucks and SUVs "to bridge the gap to the 2007, in which their lineup will be redesigned top to bottom.

At that point, he said, the GM lineup "will be more fuel efficient and have new technologies" like cylinder deactivation and hybrid engines that more customers are seeking.

Despite record fuel prices, analysts said the large SUVs and truck are not going away.

"The public is more conscious about fuel efficiency, but those who want to buy big SUVs are still buying them," said Chung.

Lindland said that while US automakers lag the Japanese in hybrids and other fuel-efficient cars, "so much of what the American consumer buys is trucks and GM is in the forefront there. GM is still looking at 27 percent market share."

Below is important automotive news about the auto industry, auto events and auto promotions.

August 2005 car and light truck sales in the United States by the major automakers. Industry totals include 22 automakers.

The table compares sales in August 2005 with sales in August 2004 and year-to-date totals for the two years. Light trucks include pickups, vans, minivans and sport utility vehicles.

Results for General Motors Corp., Ford Motor Co. and DaimlerChrysler AG do not include U.S. sales of their European brands: Saab, Jaguar, Land Rover, Volvo and Mercedes-Benz.

Percentages are based on the daily sales rate; there were 26 sales days last month and 25 sales days in August 2004, and 204 sales days for the first eight months of 2005 and 205 days for the same period a year ago.

Total Industry

Month

Car: 703,623 vs. 639,087, up 6 percent

Truck: 779,655 vs. 790,403, down 5 percent

Big Three vehicle: 803,406 vs. 829,575, down 7 percent

Asian vehicle: 578,277 vs. 503,745, up 10 percent

European vehicle: 101,595 vs. 96,170, up 2 percent

Total vehicle: 1,483,278 vs. 1,429,490, up 0 percent

Year-to-date

Car: 5,324,041 vs. 5,166,663, up 4 percent

Truck: 6,538,335 vs. 6,228,730, up 5 percent

Big Three vehicle: 6,903,099 vs. 6,702,077, up 4 percent

Asian vehicle: 4,237,154 vs. 3,941,253, up 8 percent

European vehicle: 722,123 vs. 752,063, down 4 percent

Total vehicle: 11,862,376 vs. 11,395,393, up 5 percent

General Motors

Month

Car: 148,174 vs. 167,709, down 15 percent

Truck: 198,906 vs. 232,377, down 18 percent

Vehicle: 347,080 vs. 400,086, down 17 percent

Year-to-date

Car: 1,209,220 vs. 1,271,168, down 4 percent

Truck: 1,955,262 vs. 1,832,919, up 7 percent

Vehicle: 3,164,482 vs. 3,104,087, up 2 percent

Ford

Month

Car: 80,878 vs. 62,040, up 25 percent

Truck: 188,363 vs. 189,415, down 4 percent

Vehicle: 269,241 vs. 251,455, up 3 percent

Year-to-date

Car: 679,940 vs. 629,314, up 9 percent

Truck: 1,443,561 vs. 1,465,125, down 1 percent

Vehicle: 2,123,501 vs. 2,094,439, up 2 percent

DaimlerChrysler

Month

Car: 41,100 vs. 37,154, up 6 percent

Truck: 145,985 vs. 140,880, up 0 percent

Vehicle: 187,085 vs. 178,034, up 1 percent

Year-to-date

Car: 357,897 vs. 327,291, up 10 percent

Truck: 1,257,219 vs. 1,176,260, up 7 percent

Vehicle: 1,615,116 vs. 1,503,551, up 8 percent

Toyota

Month

Car: 120,198 vs. 97,632, up 18 percent

Truck: 85,164 vs. 82,762, down 1 percent

Vehicle: 205,362 vs. 180,394, up 9 percent

Year-to-date

Car: 876,867 vs. 738,184, up 19 percent

Truck: 658,982 vs. 647,053, up 2 percent

Vehicle: 1,535,849 vs. 1,385,237, up 11 percent

Honda

Month

Car: 95,722 vs. 77,747, up 18 percent

Truck: 60,451 vs. 48,878, up 19 percent

Vehicle: 156,173 vs. 126,625, up 19 percent

Year-to-date

Car: 572,407 vs. 584,614, down 2 percent

Truck: 419,347 vs. 357,907, up 18 percent

Vehicle: 991,754 vs. 942,521, up 6 percent

Nissan

Month

Car: 50,825 vs. 43,739, up 12 percent

Truck: 41,540 vs. 36,575, up 9 percent

Vehicle: 92,365 vs. 80,314, up 11 percent

Year-to-date

Car: 397,363 vs. 364,152, up 10 percent

Truck: 345,023 vs. 282,244, up 23 percent

Vehicle: 742,386 vs. 646,396, up 15 percent

Mazda

Month

Car: 17,789 vs. 14,835, up 15 percent

Truck: 4,346 vs. 6,381, down 35 percent

Vehicle: 22,135 vs. 21,216, up 0 percent

Year-to-date

Car: 138,236 vs. 131,233, up 6 percent

Truck: 43,707 vs. 54,006, down 19 percent

Vehicle: 181,943 vs. 185,239, down 1 percent

Mitsubishi

Month

Car: 8,160 vs. 6,802, up 15 percent

Truck: 2,785 vs. 3,919, down 32 percent

Vehicle: 10,945 vs. 10,721, down 2 percent

Year-to-date

Car: 61,638 vs. 84,338, down 27 percent

Truck: 25,436 vs. 39,377, down 35 percent

Vehicle: 87,074 vs. 123,715, down 29 percent

Isuzu

Month

Truck: 722 vs. 2,749, down 75 percent

Vehicle: 722 vs. 2,749, down 75 percent

Year-to-date

Truck: 9,166 vs. 19,651, down 53 percent

Vehicle: 9,166 vs. 19,651, down 53 percent

Hyundai

Month

Car: 30,216 vs. 28,058, up 4 percent

Truck: 11,897 vs. 10,455, up 9 percent

Vehicle: 42,113 vs. 38,513, up 5 percent

Year-to-date

Car: 217,195 vs. 207,261, up 5 percent

Truck: 93,786 vs. 76,388, up 23 percent

Vehicle: 310,981 vs. 283,649, up 10 percent

Subaru

Month

Car: 12,517 vs. 10,303, up 17 percent

Truck: 4,909 vs. 5,762, down 18 percent

Vehicle: 17,426 vs. 16,065, up 4 percent

Year-to-date

Car: 88,082 vs. 78,119, up 13 percent

Truck: 40,606 vs. 43,769, down 7 percent

Vehicle: 128,688 vs. 121,888, up 6 percent

Suzuki

Month

Car: 5,895 vs. 3,467, up 63 percent

Truck: 1,321 vs. 2,549, down 50 percent

Vehicle: 7,216 vs. 6,016, up 15 percent

Year-to-date

Car: 40,340 vs. 33,221, up 22 percent

Truck: 16,015 vs. 19,066, down 16 percent

Vehicle: 56,355 vs. 52,287, up 8 percent

Kia

Month

Car: 12,310 vs. 11,611, up 2 percent

Truck: 11,510 vs. 9,521, up 16 percent

Vehicle: 23,820 vs. 21,132, up 8 percent

Year-to-date

Car: 104,565 vs. 100,987, up 4 percent

Truck: 88,393 vs. 79,683, up 11 percent

Vehicle: 192,958 vs. 180,670, up 7 percent

Volkswagen

Month

Car: 21,601 vs. 20,310, up 2 percent

Truck: 1,482 vs. 2,414, down 41 percent

Vehicle: 23,083 vs. 22,724, down 2 percent

Year-to-date

Car: 129,346 vs. 156,341, down 17 percent

Truck: 11,994 vs. 18,317, down 34 percent

Vehicle: 141,340 vs. 174,658, down 19 percent

BMW

Month

Car: 20,596 vs. 17,639, up 12 percent

Truck: 8,283 vs. 6,862, up 16 percent

Vehicle: 28,879 vs. 24,501, up 13 percent

Year-to-date

Car: 153,389 vs. 149,638, up 3 percent

Truck: 47,173 vs. 42,595, up 11 percent

Vehicle: 200,562 vs. 192,233, up 5 percent

Volvo

Month

Car: 8,038 vs. 10,048, down 23 percent

Truck: 2,768 vs. 2,550, up 4 percent

Vehicle: 10,806 vs. 12,598, down 18 percent

Year-to-date

Car: 64,034 vs. 69,690, down 8 percent

Truck: 24,212 vs. 24,127, up 1 percent

Vehicle: 88,246 vs. 93,817, down 5 percent

Mercedes-Benz

Month

Car: 15,669 vs. 15,617, down 4 percent

Truck: 3,598 vs. 2,367, up 46 percent

Vehicle: 19,267 vs. 17,984, up 3 percent

Year-to-date

Car: 116,550 vs. 122,379, down 4 percent

Truck: 22,142 vs. 17,735, up 25 percent

Vehicle: 138,692 vs. 140,114, down 1 percent

Saab

Month

Car: 2,726 vs. 2,925, down 10 percent

Vehicle: 2,726 vs. 2,925, down 10 percent

Year-to-date

Car: 30,163 vs. 25,813, up 17 percent

Vehicle: 30,163 vs. 25,813, up 17 percent

Jaguar

Month

Car: 2,634 vs. 3,848, down 34 percent

Vehicle: 2,634 vs. 3,848, down 34 percent

Year-to-date

Car: 22,149 vs. 31,899, down 30 percent

Vehicle: 22,149 vs. 31,899, down 30 percent

Audi

Month

Car: 6,911 vs. 6,473, up 3 percent

Vehicle: 6,911 vs. 6,473, up 3 percent

Year-to-date

Car: 51,802 vs. 51,464, up 1 percent

Vehicle: 51,802 vs. 51,464, up 1 percent

Land Rover

Month

Truck: 4,554 vs. 2,555, up 71 percent

Vehicle: 4,554 vs. 2,555,, up 71 percent

Year-to-date

Truck: 27,505 vs. 21,088, up 31 percent

Vehicle: 27,505 vs. 21,088, up 31 percent

Porsche

Month

Car: 1,664 vs. 1,130, up 42 percent

Truck: 1,071 vs. 1,432, down 28 percent

Vehicle: 2,735 vs. 2,562, up 3 percent

Year-to-date

Car: 12,858 vs. 9,557, up 35 percent

Truck: 8,806 vs. 11,420, down 23 percent

Vehicle: 21,664 vs. 20,977, up 4 percent