With Christmas just around the corner, television ads are filled with seemingly ridiculous images of beautiful couples buying cars for one another as gifts.
But before you reach for the remote, consider this: With Detroit in disarray and sales sliding, opening your curtains Christmas morning and seeing a shiny new car with a giant bow on top might not be as crazy as you think.
With most consumers reluctant to shop for cars at year-end, tapped out by fall new model sales and more interested in buying somewhat more modest gifts for relatives, December is usually a chilly time for vehicle sales.
And this month is likely to be frostier than usual for America’s car dealers. After posting significant sales declines in November, America’s Big Three U.S. automakers are expected to see sales evaporate further in December as they continue to struggle to sell gas-guzzling SUVs and light trucks, manage overcapacity and deal with crippling healthcare and pension costs.
“I don’t see things getting any better for the Big Three,” said Phil Lienert, associate editor Edmunds.com, an Internet-based resource for consumer automotive information. “Most people try to buy their SUVs and light trucks in November or earlier to pre-empt the bad winter weather. And so as GM and Ford are reliant on heavy trucks and cars in the winter, December will be very hard for the U.S. auto industry after an already horrible October and a bad November.”
Still, bad news for Detroit and its dealers could mean good news for the consumers, notes Kelley Blue Book analyst Jack Nerad.
Several factors make December an advantageous time get a great deal on a car, he said, including the fact that most dealerships and salespeople have end-of-month and end-of-year goals and quotas to meet. And an “inventory tax” on all unsold vehicles remaining on dealer lots Jan. 1 provides an added incentive to move vehicles.
“A time when business is slow is a good time to drive a hard bargain,” said Nerad, adding car makers want to end the year on a positive note after a poor performance in 2005.
For many dealers, annual sales volume helps determine what and how much inventory they receive in the coming year, so they are usually gunning to reach higher volume targets. Even in areas where bad weather is not a factor, consumers often focus solely on holiday shopping rather than car buying in December, again feeding dealers’ hunger for sales, Nerad added.
Car deals certainly abound. The big U.S. automakers are busy enticing would-be car buyers to sales lots with tempting incentives in a fight to stave off the erosion of their market share to more nimble rivals like Toyota and the rest of the Japanese manufacturers, who continue to grab a larger share of the U.S. auto market.
GM recently launched a “Red Tag” sale — offering vehicles at the price paid by employees of its parts suppliers, knocking more than $10,000 off the cost of some of its largest SUVs. Chrysler is offering some of customers two years of free gasoline, while Ford has launched a “Keep It Simple” incentive program that reduces prices and offers rebates.
“GM, Ford and Chrysler really are throwing money at their customers, but the catch is you can’t get these rebates and incentives on their most popular and cool cars, like the Dodge Charger and the Magnum, or the Chrysler 300,” said Edmunds.com’s Lienert.
But analysts also say a slow December means dealers will offer good prices on some of their hottest models, including hybrids, so shoppers could bag a popular car like the Toyota Prius at close to its manufacturer’s suggested retail price.