TAMPA, FL – The largest new car dealership, AutoNation Inc. reported on Thursday a 37% drop in third-quarter profits, citing a huge dip in new car sales. The company reported that sales are still in a slump after the hugely successful employee pricing program initiated by General Motors, and mirrored by every domestic car manufacture.
This may be the case, but it does not resonate with simple reason. First, CarMax, the nations largest used car dealership, is up 60% this year (2). We have also reported on this blog that used car sales are surging.
Last year’s employee pricing program cannot explain the huge spike in used car sales. We have to look elsewhere for an explanation. I decided to look at the index of consumer sentiment produced by the famous University of Michigan. In September we saw this index plunge by 19% largely in response to higher gas prices and lower than expected pay increases.
We think that consumers are not as confident about financing a new car.
Car Price Analysis
How will this affect new car prices? Well the demand for new cars decreasing, expect larger than expected discounts on certain makes and models. Your best bet to an awesome deal: Look for new cars that have a predecessor coming soon. (e.g. 2007 F-150 as opposed to the 2008 F-150 coming soon). They should have the deals because if there is still a huge stock when the new models enter the car lot, they will discount deeply just to clear the lot.
Best Sites
www.autodiscountgroup.com to find car prices from local dealers.
Sources Cited
1) MarketWatch New Car Sales
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B1CCD834F%2D48EA%2D4283%2D9B4F%2D363802DB9AC5%7D&siteid=mktw
2) Investors.com Car Max Article.
http://www.investors.com/editorial/IBDArticles.asp?artsec=19&issue=20061024
3) Bloomberg Consumer Sentiment Plunges 19%
http://quote.bloomberg.com/apps/news?pid=10000103&sid=aZ7Gk3WlEIXY&refer=news_index