Steamboat Springs Fueled by manufacturers' offers of zero-percent financing on new vehicles, Steamboat's two car dealerships have enjoyed record sales in October and November.
Steamboat Motors, which sells Ford and Dodge products (among others), sold a monthly record of 96 vehicles in October. Cook Chevrolet Olds Subaru saw new car sales in October that exceeded the numbers for last year by 68 percent. And a single salesman at Cook sold 33 vehicles in October.
"I've talked to a lot of dealerships large and small all over the country in the last 30 days, and I don't know of one that didn't set a record in October," Steamboat Motors General Manager John Centner said.
The fall buying spree is largely a result of the financing deals, but officials also said the mood of the nation hasn't hurt. Scott Cook of Cook Chevrolet said automotive manufacturers seem to have tapped into the patriotic spirit of Americans who were motivated to do something for the national and local economy in the wake of the Sept. 11 terrorist attacks.
"They hit the public at just the right time," Cook said. "You'd have to be a lot smarter than me to figure out the public psyche."
Cook believes the combination of patriotic spirit and interest rates that saved buyers thousands of dollars over longer term financing arrangements, combined to drive unprecedented sales figures.
"People were waiting for something to push them one way or another," Cook theorized.
Stacey Rogers, a 17-year veteran at Cook, sold 33 vehicles in 25 days. Most of his sales were to repeat customers and referrals.
"It was amazing," Rogers said. "The lack of inventory hurt us at the end of the month. I could have sold more vehicles."
Rogers said between Cook's two stores in Craig and Steamboat, they started the month with 67 new GM vehicles and sold 59 of them. A more typical number for October would have been between 15 and 20 new GM sales.
Cook and Centner said the majority of their customers did not actually take advantage of zero-percent financing. The no interest arrangements were almost universally tied to a 36-month payback, and even without interest costs, the monthly payments on many new vehicles was more than some buyers could handle.
The math on zero-percent car loans is easy enough to do a $30,000 pickup truck (not including sales tax, etc.) would generate monthly payments of $833, and a fully loaded sport utility priced at $40,000 would work out to 36 monthly payments of $1,111.
In lieu of zero-percent financing for 36 months, many buyers took advantage of unusually low interest rates on longer term financing. For example, Cook said, a 48-month loan might have carried a 1.9-percent interest rate and people who wanted to spread their payments over 60 months could still get a 2.9-percent rate.
Rogers said he had some savvy buyers who were in a position to take advantage of the zero-percent financing and managed to take cash out of the deal. Take the theoretical case of a customer seeking to buy a $40,000 vehicle who was bringing a trade-in valued at $20,000 to the deal. Some people would have assigned $10,000 of that trade-in to their down payment and borrowed $30,000 at zero-percent, Rogers said. They took $10,000 cash home with them, then had the opportunity to turn around and invest the $10,000, which represented "free money."
Since any return is higher than zero, they could come out ahead even with a bank CD offering 3-percent interest.
"The thing that was good about the program was that it was straight across the board," Cook said. Chevrolet didn't limit the low interest rates to restricted models that weren't in high demand. The low rates applied to the most sought after vehicles, like Tahoes, he said.
Similarly, Centner said, Ford and Dodge were willing to "incentivize" his dealership's biggest sellers heavy-duty trucks.
"We were able to offer 2.9 percent interest over 60 months on super duty trucks," Centner said. "That's unheard of in that particular product line."
Some of October's sales were due to work that salesmen had already done with interested customers and the low interest rates helped convert tentative buyers into firm sales.
Centner said he was proud of his three-person sales force for keeping their service standards up while coping with the onslaught of car buyers in October and November. But they don't get a rest just yet.
Local car salesmen are plunging back into the fray this week as all of the major automotive manufacturers are announcing the reinstatement of zero-percent financing for new cars.
The impact of zero-percent financing may not be as great in December as it was in autumn simply because inventories have been reduced. Manufacturers are struggling to keep pace with demand right now, Centner said. Cook has had Denver dealers come to him to secure new vehicles for customers that they couldn't supply off their own lots. He's also sent vehicles to dealers in Utah and as far away as Idaho.
Vehicles that are in ample supply are used cars and trucks taken in as trades on new vehicles in October and November.
Centner said the low interest rates have offset the depreciation that new car buyers absorb when they drive their new vehicles off the lot. But for shoppers who avoid new cars in order to avoid that front-loaded depreciation have more choices than ever and can take advantage of aggressive pricing that results from the glut of used cars on the market.
Cook agreed that the used car market is very much subject to supply and demand, and the used car market is beginning to soften.
"We've done nothing but dealer trades for six months," Cook said.
The dynamic that pushes used car prices down, Cook said, comes into play when consumers compare their monthly payments for a used vehicle to what they'd pay for a new car at lower interest rates. Even with used car loans available as low as 5 or 6 percent, "those used cars have to be enough less on price," than a new car in order to look like the better buy, he said.
Rogers and Centner agreed that if there is a potential downside to this season's bonanza of new car sales, it could surface in spring, when buyers are typically experiencing renewed interest in new car purchases. Some of the local demand that would have surfaced when the weather warms and the leaves turn green may have already been met by the previous autumn's promotions.
"We may pay the price for what we did in October in April and May," Centner predicted.