Auto Dealers Report Record Sales for New Vehicles
Full Speed Ahead
As the calendar cruises into October, area auto dealers report that they are well on their way to a banner year. A combination of factors — from a need to replace aging cars to lower gas prices to an improved economy — are fueling solid sales across virtually all classes of vehicles. And as the final quarter commences, dealers are keeping their foot on the gas when it comes to programs and incentives to drive more purchases and leases.
Jay Dillon called it the “perfect storm.”
But instead of a maelstrom of events leading to a disastrous outcome, the co-owner and dealer operator for Dillon Chevrolet in Greenfield was referring to a strong and rising gale that is driving new-car sales in the region and across the country.
Local dealers say their numbers have exceeded January forecasts by industry leaders, who predicted an increase of 3% and a rise in sales for the sixth year in a row, which would translate to 17 million new vehicles, a figure that hasn’t been seen since 2005.
And even though many people stayed inside last winter due to the bitter cold and record snowfalls, pent-up demand resulted in what Dillon called an “amazing” spring.
“Every day when we opened our doors, there were people waiting to come in,” he told BusinessWest.
Other major dealerships also reported healthy spring and summer sales, and as to that storm, well, it resulted from a convergence of conditions related to the economic climate. People held onto their cars during the downturn in the economy, so the average auto on the road today is 10 or 11 years old, which means its useful life is coming to an end. Meanwhile, gas prices have dropped significantly, while consumer confidence has risen and manufacturers have become aggressive in their competitive quest to attract buyers, offering incentives that range from cash back to 0% interest on many makes and models. In addition, buyers are enticed by advances in safety, design, and technology.
“People have been able to keep their cars longer because they are much more reliable than they were in the past,” said Bill Peffer, president and chief operating officer at Balise Motor Sales. “Quality has become a commodity, but eventually they have to be traded in, and everyone in the industry has benefit1ed from this factor. Buyers also have more choices than ever before.
“The biggest segment of growth is in crossovers; they have great fuel economy and the capability of a truck, but are more compact,” he went on. “Manufacturers continue to build new products that give people compelling reasons to purchase a vehicle, and overall, our sales have exceeded our expectations; they are equal to or greater than those in the general market.”
TommyCar Auto Group is also doing well. “Our sales are up over last year by quite a bit in every store, especially Hyundai,” said President Carla Cosenzi, adding that small crossover vehicles such as the Nissan Rogue and Hyundai Tucson have become big sellers, and she expects sales to remain high through the end of the year.“Although we expected an increase, we kept our projections conservative, but we have definitely outsold what we anticipated, and are looking forward to a really strong end of the month in September, October, and November,” she said. “A lot of people are beginning to think about the weather. As we head toward winter, they want to make sure they are in a safe, reliable car, and we will have great offers that should make a difference in our year-end sales. We have two major promotions that will start in October and run until January. We have revamped our strategy and are excited to roll it out.”
However, local dealers differ in their tactics to attract buyers and retain customers, so for this edition and its focus on auto sales, BusinessWest explores the strategies that help fuel sales.
Tried and True Methods
Cosenzi said TommyCar’s three dealerships each gave away a brand-new car in recent weeks — a Volkswagen Passat, a Hyundai Accent, and a Nissan Versa.
Advertising for the promotional event kicked off at the beginning of the summer, which increased volume during the busiest time of year. “It drove a lot of traffic,” she said, adding that many people who entered the drawing decided to test-drive a vehicle, and the 0% financing offered by Hyundai and Nissan on leases propelled sales higher.
It’s not the first time TommyCar has given away new automobiles; in the past it staged a jingle contest and a TV-commercial contest, and the winners drove home new vehicles. But it never had a contest people could enter simply by showing up and dropping an entry form in a bucket.
“Our customers couldn’t believe it, and three happy people went home with new cars. Two had shopped us before, one was waiting to buy until she saw if she had won, and the other had recently purchased a car from us,” said Cosenzi, adding that “a really aggressive plan for the coming months should make 2015 the strongest and best year we have had in some time.”
The deals are sweetened across the board right now, however, thanks to the ‘summer selldown’ events taking place at every dealership. The 2016 models are rolling in, and spokespeople say manufacturers are offering special incentives to clear out the 2015 editions.
“It’s a time of year when people can get a really great price on a new vehicle,” said Dillon.
Peffer agreed. “Although new models are launched throughout the year, manufacturers typically offer aggressive incentives in the fall before the majority of new vehicles arrive, so we create a market,” he explained. “We’re motivated to sell all of our 2015 models before Jan. 1, when they automatically become a year older.”
Again, one of the factors in that perfect storm Jay Dillon referred to plays heavily into the stream of buyers seeking a good deal: the age of the average vehicle on the road, which is around 10 years. “Many people are facing the situation of having to repair or replace their vehicle due to its mechanical issues and high mileage. The entire industry is benefiting from this; it’s a wave we’re riding right now,” Dillon said.
Tom Dillon, co-owner and general manager of Dillon Chevrolet, said many people bring their older car into his dealership for service, and when they find out what it needs in terms of repairs, they are driven to purchase a new one. In the majority of cases, that purchase is at Dillon Chevrolet.
“We’re big on retention and people return to us because they have gotten good service. My father opened this business in 1962 and always said, ‘the sweet taste of a good deal is quickly soured by bad service,” he said, explaining why exceptional service has always been one of the dealership’s priorities.“Three-quarters of our sales are repeat customers. We’re hands-on owners who are here every day, and if someone has an urgent problem, we accommodate them immediately. We are a small town and are selling to our friends and neighbors,” Jay Dillon noted, adding that they discount vehicles beyond manufacturer’s rebates, and most customers spend less than an hour completing a sale.
It’s that same loyalty that Balise relies on to spur sales.
“We offer state-of-the-art facilities and low prices,” Peffer said. “We’re a large dealer group, and we’re consistent with our advertising, which is based on our great selection, facilities, and the fact that we treat our customers right. We generate trust and do an excellent job of staying connected to our customer base.
“Our focus is on retention, so our strategy is to develop a long-term relationship with our customers. And we have so many brands that we can offer a solution to anyone’s driving,” he continued, remarking that, although sales at all of the company’s dealerships are growing at a fairly consistent rate, Balise Subaru in Rhode Island is doing exceptionally well. “But we want people to think of Balise first, before they think of any type of vehicle.”
Special promotions, such as the free cars TommyCar Auto Group gave away a few weeks ago, increased the number of visitors to the group’s dealerships. “We welcome people into our showrooms, and after they see the amenities we offer and meet our staff, they often buy a car,” Cosenzi said.
But other things attract buyers as well, and Tom Dillon says General Motors’ 2016 products will be game changers for the industry and his family dealership.“The all new Chevy Malibu is a big player in the mid-size segment; it’s a hybrid with a turbo engine that gets 47 miles per gallon. And the 2016 Chevy Cruze has been redesigned; it gets 42 miles per gallon, is safer, more efficent, and has 10 airbags,” he told BusinessWest. “There is also a new Camaro coming out that is lighter and has more horsepower and better handling. And every GM car will have 4G LTE.
“GM is the only one with 4G in all their new products, and we’re seeing more and more young people in our brand because of the technology — it gives us a competitive edge,” he continued, adding that manufacturers constantly make changes, but complete redesigns of a multitude of vehicles like this take place only every eight or nine years. “The Equinox will also be all-new, and demand will be high.”
Peffer agrees that technological advances are effective lures. “The new-car experience is exciting because of rapid changes in products, style, technology, and performance,” he said. “More and more cars are equipped with parking assist and lane departure, which started in Lexus. It allows the vehicle to sense if another automobile is in the blind spot, and warns the driver with a beep or a light. Back-up cameras, which offer a 360-degree, bird’s-eye view of what is in every direction, didn’t exist a few years ago, and some are in entry-level products, including most, if not all, Hondas. There are also cars with wi-fi hotspots that allow passengers to connect to the Internet in real time. Competitiveness in the industry has led to more choices for consumers than ever before.”
Leasing is another sales avenue on the rise because these vehicles are under factory warranty, payments are low, and regular maintenance is the only out-of-pocket expense.
“People see advertisements for payments on a brand-new car that are less than they are paying for an older vehicle, which entices them to visit the dealership,” Cosenzi said, adding that the value of trade-ins get worked into the deals.
New auto sales plummeted in 2008 due to the downturn in the economy and the fact that gas prices reached $4.25 a gallon. Those factors affected all dealers as well as a multitude of other industries, but fast-forward to 2015, and it’s an entirely different market.
“Our sales were up by 20% in the first six months of this year, and we have already approached our 2007 numbers,” said Tom Dillon. “We’re expecting that 2015 should be the biggest year ever for the entire auto industry.”
Peffer expects sales at Balise’s 13 dealerships to continue to be robust through the end of the calendar year and into 2016, due to manufacturer’s promotions and the aforementioned economy-related conditions that are inspiring people to get behind the wheel of a new car.
“For anyone considering buying a new vehicle,” he concluded, “it’s a great time to buy.”