Auto industry can putter on used cars

Marketplace Staff Mar 3, 2009

Auto industry can putter on used cars

Marketplace Staff Mar 3, 2009


Steve Chiotakis: There’s likely to be more bad news out of Detroit today. American carmakers release their sales figures from last month. And analysts expect February to be even worse than January — that month was the worst in decades. And no one knows more about just how bad the car business is these days than the dealerships. But some of them are finding that the used car business is helping them get through this economic fallout. David Chong reports.

Luis Rodriguez: It’s got the mini battery . . .

David Chong: Luis Rodriguez is shopping for cars.

Rodriguez: What’s the asking price?

But he’s not looking at any shiney new models. He thinks he’ll get more value with something slightly used.

Rodriguez: I don’t like buying new. Just because of the price itself, you know. You know, if you buy mildly used, you already, somebody took the hit for it, you know? The depreciation money.

New car sales are on a dramatic downward slide from around 16 million in 2007 to about 13 million in 2008. And it looks like things will get worse before they get better. With fewer people looking for new cars, dealers are depending on customers like Rodriguez to help them get through this slump.

Don Herring, Jr. owns three Mitsubishi dealerships in the Dallas metro area:

Don Herring, Jr. In 2001, we sold almost 10 new to every used car. And now we’re selling three to four used cars to every new car. So the market has changed towards used cars like the rest of the country.

Herring says he’s devoting more space on his lot for used cars. In fact, he’s sending buyers out to auctions three times a week to snap up more of them. There just aren’t enough trade-ins to keep up with demand. And he says he often can make more profit per used car sale than with new cars.

Herring: Used cars are still unique. It’s probably the only one like that, with that exact condition, those exact miles. And so it makes it a little bit more of a true market, a true free market.

Compare that with new cars. Herring says he’s stuck with about a 2 percent profit margin — and that’s when the economy is good.

But used car sales won’t save all dealerships. The problem remains with new cars. Sales are expected to drop to around 10 million this year.

Sam Pack owns three Ford dealership in Dallas:

Sam Pack: If the industry stays at 10 million, we have major issues facing us. And those major issues would be too many manufacturers and too many dealers.

Pack says some dealerships will close. But he believes his experience — and Texans love affair with cars — will keep his business running.

In Dallas, I’m David Chong for Marketplace.

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