As consumers pull back, auto dealers focus on used car sales

BALTIMORE (Map, News) - If all his auto dealership did was sell new cars, Jimmy Berg said he’d be nervous.

Consumers, spending more on gasoline and home heating while sorting through credit issues, have pulled back their spending on new cars.

Dealerships such as Owings Mills-based Len Stoler Automotive, where Berg is vice president, are focusing efforts on their used car businesses along with parts and services segments to make up for any revenue decrease related to new car sales.

“We’re probably carrying less new car inventory but we’re finding our used business to be very strong,” Berg said. “When economic times are tough, the consumer is going to look for value.”

About 16.2 million new cars and light trucks were sold in the United States last year, according to Paul Taylor, chief economist of the National Automobile Dealers Association. Taylor predicted new vehicle sales would drop to about 15.7 million this year.

“There’s no doubt you’ve got a slow market for new vehicle purchases,” said Wayne Phillips, a consultant for the NADA’s 20 Group, which helps used vehicle dealerships improve operations. “Dealerships need to scale down their dependence on new vehicle sales.”

With about 42 million used cars sold in the United States annually, Phillips said dealers are focusing on used sales “more than ever.”

Increasing inventory, a shrinking market and higher costs could make 2008 a “tough year” for automakers and sellers, said Peter Morici, professor at the University of Maryland’s Robert H. Smith School of Business.

“There’s already excess capacity in the auto industry,” Morici said. “In the car business, they sell the cars at a discount, which drags down the cost of used cars.”

With that in mind, Berg said prospective car buyers can find good deals for both new and used cars.

“We’re really focusing on the customer,” Berg said. “For someone who wants to buy, it’s actually a good time.”

acannarsa@baltimoreexaminer.com

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