Expect Big Discounts: Car Dealers Complain "We're Full"

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After a long sales boom, dealers are struggling to sell cars.

New models are on the way but the Lots are Full Car Dealers Say.

“We are turning down cars and are being more picky on the cars we stock,” said Brian Benstock, general manager of Paragon Honda in New York City. “We just can’t take more. We’re full.”

New car sales have been slumping in many of the world’s major auto markets. In China, sales were down more than 12 percent in the first six months of the year.

In the United States, after many years of strong sales, many consumers are driving vehicles that don’t need to be replaced. Newer cars and trucks tend to be more durable and hold up longer than cars made even a decade or two earlier. At the same time, the average price of new vehicles has risen to around $35,000, while interest rates on auto loans have edged higher. That means people have to be willing and able to spend more to buy a new car than they were just a few years ago.

“It’s a double whammy,” said Mike Jackson, chairman of AutoNation, the nation’s largest chain of new-car dealerships. “Customers are having monthly payment shock.”

The slump in car sales has already forced some companies to cut production and jobs. General Motors recently stopped making cars at a plant in Lordstown, Ohio, that made the Chevrolet Cruze and is winding down manufacturing at another factory in Detroit. Honda recently ended a shift at its plant in Marysville, Ohio, that makes its Accord sedan and other models.

What is perhaps most worrying for the industry is that sales of larger vehicles — S.U.V.s and trucks — that had more than made up for a recent collapse in purchases of sedans, are showing signs of strain.

Despite declining car sales manufacturers kept of profits by selling more expensive SUVs but the boom is now over

Trump won the 2016 election with help from rust-belt states. Now manufacturers are scaling back production on Michigan and Ohio.

Expect this trend to accelerate.

Mike "Mish" Shedlock

Comments (24)
No. 1-18
Casual_Observer
Casual_Observer

This has been a secular trend since the last recession. Millenials just need a new smartphone to do anything. Per use is the way of the future.

Mish
Mish

Editor

Correct C-O Lot of these big SUV sales are from retiring boomers feeling great about the stock market

Dan Salt
Dan Salt

Market never fully recovered post 2008 in the West. Younger people don't want the fixed costs that come with cars. The internet and delivery systems make them less necessary in many urban environments. Robotic cars and the decline as cars as status symbols means the industry is probably going to need large scale restructuring. Sadly a lot of people are and will lose their jobs.

shamrock
shamrock

The problem is there are years of these anecdotes, and then the sales numbers come out and they are just fine. Recession indicators are flashing like crazy all the time but the GDP comes out and it's 2.1, 3.1.

FDCROSS3853
FDCROSS3853

The price of new cars is outrageous!! GM wants $100k or more for a truck or SUV!! They are overpriced and depreciate to less than half that in 4 years!! I'd rather walk than pay that much money for one of their boring vehicles!! Two of my cars are 2005 Mopars. I'd rather push a Dodge than drive a Chevy!!

everything
everything

SUV sales finally planed out, and truck sales relaxed a little. But, if we look at # of vehicles sold things look pretty strong, AND, they are selling big dollar vehicles, SUV and trucks. They are turning down cars because sales are in free-fall for years on end, sales people follow trend and stock inventory accordingly. Still, the layoffs are very healthy, and good for stock prices since more automation will replace the people next go around.

mark0f0
mark0f0

Cars are lasting longer than ever. Its not uncommon, especially in non-rustbelt areas, to get 20-30 years of good reliable operation out of a car with fuel economy figures that are within earshot of the hardware currently selling brand new.

CautiousObserver
CautiousObserver

Recent history shows that major price corrections on new cars will not be allowed if it puts the auto manufacturers' business models at risk. Last time there was a risk of big discounts in 2009, in a page taken from a Potemkin Villiage, U.S. lawmakers removed the entire U.S. used car market from the supply/demand equation at taxpayer expense. Taxpayers paid for this "great program" multiple times: once in the form of a price-supported new car where a good used car might otherwise have been available, also in the form of being obligated to pay more taxpayer dollars in the future, and again in the form of the negative environmental impact from intentionally destroying useful assets before they were worn out. Brilliant!/s

Greggg
Greggg

Most auto manufacturers count a vehicle as sold as soon as it hits the dealer's lot, so sales figures are going to be skewed.

Stdavid
Stdavid

This decline is a tiny fraction of what the future has in store. The auto makers world wide have committed over $84 billion to Ev's. Huge companys such as Honda and Toyota are developing chassis that they will install the batteries and their individually styled body's on. The current SUV's etc. are going to be dinosaurs within 5 years

Irondoor
Irondoor

Here in Montana, it’s all pickup trucks for men and SUV’s for the wives. However, these pickups will easily run 200-250,000 miles with careful maintenance. Easily repairable. Nobody will buy these $60,000 trucks unless they are necessary for business purposes. I only buy used trucks. Let someone else pay for the depreciation.

Moochy
Moochy

Trucks are WAY overpriced. There is no way to justify what dealers get for trucks and SUV's. I refuse to pay those prices.

Enbedded_Journalist
Enbedded_Journalist

New vehicle prices have hit the ceiling, folks have finally said enough! I looked at a new Chevy 4x4 1500 Silverado Z-71 Crew last week. The MSRP was 45 Grand for a basic trimmed truck. Oh and another thing your $45K only gets you the mighty 2.7L 4 banger under the hood, and NO fancy tailgate either. So meanwhile at the my Independent Pre-Owned Truck, SUV, and auto dealership.. business is humming along. in fact last month, was nearly a record.

ReadyKilowatt
ReadyKilowatt

Everyone wants a "goldilocks" economy. Seems like this is a good opportunity to set yourself up for a soft landing. Unfortunately people working in those factories aren't going to have a rainy day fund for when the factory shuts down. In fact they're more likely to have ongoing credit repayment that they took on assuming the good times will always be there.

I like to think I'm an optimist, but I know there's going to be a recession, always is. That downturn is going to allow for some bottom feeding. If you can take advantage of the bargains you might do pretty well. If you're facing bankruptcy because you lost your primary source of income you probably won't want a recession. And more importantly you probably won't see it coming either.

Tater-Man
Tater-Man

Younger people are struggling to pay student debt, which is not a problem -- college costs are the problem, debt is only the symptom. With college costs skyrocketing out of control, many multiples of CPI or wage growth, there obviously is less money available for everything else. Young people rejected $1000 iPhones too, same reason.

Persons nearing retirement (as a group( have overspent, and under saved for decades. The day of reckoning is upon them. They can't afford to buy a new vehicle either.

Many vehicles last a lot longer than they used to.

Its absurd for car manufacturers to think consumers should buy a new car just because the car company (and or UAW) decided to run their factories full out. That is not, and never was, a valid reason to buy.

Obama's cash for clunkers pulled a lot of vehicle demand forward, so all else equal demand that would have happened this year was already filled a few years back. The bill for robbing the future has come due.

None of these trends are new, with the exception of Obama robbing the future with cash for clunkers. Obama did not invent robbing the future, politicians have been doing so for years under various guises.

Baby boomers lived far beyond their means their entire working lives, and now they think they can retire and stick poorer generations with the bill. Good luck with that.

Six000mileyear
Six000mileyear

I've had my car for 10 years. It will need a new timing chain, water pump, alternator, and clutch in about 18 months. I'm going to either get the engine replaced or rebuilt instead of buying a newer car. Property taxes on cars is absurd, so this is one way of keeping them low.

bradw2k
bradw2k

A nice used car is $15k. Peeps laying out $35k or more for a new car must be feeling pretty rich. That feeling must feel nice.

Herkie
Herkie

I can tell you that in spite of what you might think credit is screamingly tight unless your score is over 750. I have a score a little over 700 and could not get a bank loan to refi my car which is worth more than what I owe. I am starting to think if your score is under 750 you really need to own a house in order to get any kind of consumer credit. Oh yeah, I also went to ask the Chevy dealer a few questions about a Camaro Convertible and he tried to talk me into buying a new Corvette they had, I always thought that those were 80-90 thousand but this was very nice for 55k so I said well can't hurt to see what sort of payments it might have. The finance department tried with 5 different banks all turned me down, and my credit was over 700 till then, those inquiries hit my score for 81 points! I don't care that much, I am pretty ready to abandon the US anyway.