Autos

Year-end Sales Are a Gift for Car Makers, Dealers, and Consumers

’Tis the Season

Peter and Michelle Wirth, co-owners of Mercedes-Benz of Springfield, stand in a showroom that is expected to see a heavy volume of shoppers looking to take advantage of end-of-year sales.

The names of the programs have become ingrained in consumers’ consciousness — December to Remember, Winter Sales Event, Wish List Sales Event, and many others — and the TV commercials are seemingly endless. But the year-end auto-sales initiatives have several goals, and have become a present for dealers and consumers alike.

The commercials started appearing during the football games and the Jeopardy! Tournament of Champions, among other places, a few weeks ago.

You’ve seen them … the ones where mom or dad, or perhaps their college-age daughter, looks out the window on a snowy Christmas morning to find a new car in the driveway with a big red bow on the roof or the hood.

The commercials, and there are a lot of them now with a host of themes, are part of what has become a very important — and generally very joyous — time for car makers, car dealers, and, yes, consumers: the holiday, end-of-year sales.

These campaigns all have names now — there’s the Toyota-thon, the Lexus December to Remember, the Mercedes-Benz Winter Event, the Lincoln Wish List Sales Event, and many others. And while it was once mostly a luxury-brand initiative, it’s now generally across the board.

“You have all this inventory being built based on how many vehicles the industry analysts believe are going to be purchased that year. Well, if they forecasted ’19 to be up, and it’s flat, right away you have probably more inventory than you need; this is going to be a great holiday for consumers.”

As for those commercials, while farfetched to some, they are, well, spot on in some respects.

Indeed, a growing number of consumers will ask for that red bow, and, yes, they do like to have it on the car as it sits parked in the driveway or garage on the holiday morning, said Ben Sullivan, chief operating officer for Balise Motor Sales.

“It happens more than most people might think,” he told BusinessWest, adding that, while some dealers will make timely and perhaps dramatic deliveries — even on Christmas Eve — most buyers will get the car (and the bow) a few days before and stash them somewhere.

And there should be more cars with ribbons on them in driveways this year, figuratively if not literally, said Robinson and others we spoke with, because this year’s holiday season is shaping up to be a big one for consumers.

That’s because, overall, auto sales in 2019 have been flat, which is still good considering how strong they’ve been for the past few years. But they were projected to be a few percentage points higher than last year.

Roughly 3% to be more precise, Sullivan went on, adding that 3% of 17 million (the approximate number of cars sold in each of the past few years) is a big number.

“You have all this inventory being built based on how many vehicles the industry analysts believe are going to be purchased that year,” he explained. “Well, if they forecasted ’19 to be up, and it’s flat, right away you have probably more inventory than you need; this is going to be a great holiday for consumers.”

But that’s only one of the reasons why this could end up being an extraordinary holiday sales period, said those we talked with, adding that, in addition to the traditional tax breaks for commercial vehicles — especially the first-year bonus depreciation deduction — a number of other factors are quite favorable.

Ben Sullivan says the holidays sales event help clear lots of cars in advance of the new model-year arrivals, while also helping manufacturers meet their goals for a given year.

These include gas prices — a little higher than earlier in the year, but still relatively low — as well as interest rates (low but projected to climb in 2020) and consumer confidence, which is still rather high as recession fears have eased in recent weeks.

But even in what would be considered more typical years, the holiday-season sale has become an effective vehicle for clearing lots of cars before the new models roll in, and also for introducing a brand to people who might otherwise overlook it.

That’s the case with Mercedes, which has been working hard in recent years to convince car buyers that its models (or some of them, anyway) are within their reach.

Peter Wirth, co-owner of Mercedes-Benz of Springfield, said the dealership, which draws from a large geographic area that includes Southern Vermont, Southern New Hampshire, Eastern New York, and Northern Connecticut, has been active in trying to introduce itself to consumers seeking a lower price range. And the year-end event has been one of many drawing cards.

Joe Clark, general manager of Steve Lewis Subaru in Hadley, said that car maker’s holiday sales event has a different name and different twist. The former is Share the Love, which partially explains the latter, which involves contributions to charities, which adds another ‘win’ to what was already a win-win-win scenario.

Subaru donates $250 for each car sold to a charity of the buyer’s choice, said Clark, adding that there are national and local options, and Steve Lewis matches with $50.

“In 2019, it took until July before all the ’18s had been sold off. In the meantime, all the manufacturers are making ’19s, and here we are coming into the end of the year; you want to start as clean as you can with the next model year.”

“Over the past few years, we’ve been able to raise more than $50,000,” he said, adding that, while Subaru doesn’t offer the same kinds of incentives as other makers — he says it doesn’t need to because the cars are priced appropriately — the charitable donations act as an incentive to bring consumers to the showrooms at the end of the year.

For this issue and its focus on transportation, BusinessWest talked with area dealers about these year-end sales and how they’ve become a different type of holiday tradition.

Opportunities Present Themselves

Tracing the history of the holiday sales push, Sullivan, who works for a company with more than a dozen brands in its portfolio, said that, traditionally, November and December were not big months for dealers, emphasizing the past tense.

Weather played a part in this, he said, as well as the fact that people are, by and large, focusing their time, attention, and spending dollars on the holidays and not a new car.

To spark some life into end-of-year sales activity, manufacturers, as a group, began to offer some of their best incentives at that time of the year, with the goal of hitting sales targets set roughly 12 months earlier.

Now, the deals, the incentives, and, yes, those red ribbons have become a tradition, and savvy buyers set their watches by it.

So much so that October has become a somewhat lackluster month for many dealers.

It wasn’t for Mercedes, which stages an annual certified pre-owned sale that month, said Wirth, adding that the Springfield dealership had a great October and was challenged to keep a good inventory of used cars on the lot.

But that’s another story.

This one is about the holiday sales events, which have, overall, done what they were designed to do — clear inventory and help manufacturers and dealers hit their numbers.

Joe Clark says Subaru’s ‘Share the Love’ year-end event provides consumers with still another reason to shop that brand at the end of the year.

And this year, the sales will be needed to do both, said Sullivan, noting, again, that sales have been flat and there are a lot of 2019s still on the lots that manufacturers would prefer to see gone by year’s end or at least early next year.

“In 2019, it took until July before all the ’18s had been sold off,” he went on, adding that some 2019 models, like the Toyota Tacoma, are still being built. “In the meantime, all the manufacturers are making ’19s, and here we are coming into the end of the year; you want to start as clean as you can with the next model year.

“So this year, in particular, will be interesting because it took so long to get the ’18s sold off, and now we have ’19s that we have to sell off,” he continued. “I expect that the manufacturers are going to do even more in this holiday season than they would typically in order to alleviate that stock level.”

Wirth said Mercedes has two major seasonal pushes — its summer sales program, designed to help dealers clear out inventory before the new model year arrives, and the year-end initiative, which helps meet annual sales goals.

The latter, the Winter Sales Event, is among the oldest in the business, Wirth noted, adding that Mercedes throws not only large amounts of marketing dollars at the program, but some attractive incentives as well.

“And we latch onto these programs on a dealership level because it’s not just marketing,” he told BusinessWest. “The deals are actually really good; if you’re in the market for a new car, November and December is a really good time to buy.”

Elaborating, he said that, while the incentives might not change on some of the models — and Mercedes has quite a few of them — for those months, the deals will become better for models where there is significant inventory and an opportunity to make a dent in it.

And unlike the deals presented by many manufacturers, those at Mercedes involve the latest models, in this case 2020s, as opposed to the 2019s on most lots.

Wirth told BusinessWest there isn’t a deep body of work when it comes to this dealership and the year-end sales events; after all, it opened just a few weeks before the holidays in 2017. But already some trends have emerged.

One involves commercial vehicles, and, yes, Mercedes sells a good number of them. Its vans, the mid-sized Metris and full-size Sprinter, can compete with other makes on price, and they have the Mercedes star on the grill, said Wirth, adding that some of the SUVs also qualify for what’s known as the Chapter 179 tax deduction.

“The accountants talk to their clients and say, ‘hey, you need to do something,’” he noted, adding that, while he can’t remember whether November or December was the top month for van sales last year, the other came in just behind.

Another trend involves the last few months of the year becoming some of the busiest of the year, something that has pretty much always been the case for luxury imports. In fact, the week between Christmas and New Year’s might be the busiest of the entire year, although the week before the holiday is also quite busy, said Wirth, adding that the perception that the very best time of year to buy a car is toward the end of December may well have something to do with this.

But he said the dealership strives to make it a good experience regardless of the month or the date.

Overall, the year-end tax breaks on commercial vehicles have long made November and December strong months for those types of transactions, said Sullivan, adding that, over the past several years, the holiday sales events have broadened the scope of activity to pretty much all brands and all types of vehicles. They’ve made October a somewhat lonely month for dealers, but November and December a time of excitement and, well, anticipation as they wait to see what the incentives will be.

“It’s much like a Christmas present for dealers — we have to wait to open it up when they say ‘the event is now on, and here are the consumer incentives you’ll be able to offer,’” he explained, adding that the numbers are generally known by the middle of November.

And while dealers and consumers are on the receiving end of presents, Subaru’s annual holiday event puts another group in that category — regional and national nonprofits.

“It’s not about car sales or how much you can save on a car,” said Clark. “It’s about Subaru doing what’s right and raising a bunch of money for some great charities.”

Like all the other programs, though, it provides consumers with a reason — or some additional reasons — to shop at the end of the year, he went on, adding that, over the years, the Steve Lewis dealership has supported groups and agencies ranging from area schools to the Dakin animal shelter. This year, the beneficiary will be Cooley Dickinson Hospital’s Cooley Cares for Kids program.

While there are some inventory-clearing motivations for the holiday-sales event, generally Subaru doesn’t have excess-inventory issues, he noted, and, in fact, keeping a supply on the lot is the main challenge.

That’s a Wrap

As he talked while walking through the Lexus dealership on Riverdale Street, Sullivan gestured to the ornate red ribbons atop each of the models on the floor.

He said they’re supplied by a local maker, and generally start appearing on car roofs a few weeks before Thanksgiving. He didn’t say whether this year’s order was larger than normal, but he certainly implied that more ribbons — again, figuratively if not literally — will be needed this year.

That’s because, as he said, this is shaping up to be a joyous a holiday for consumers — one right out of one of those commercials.

George O’Brien can be reached at [email protected]

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