Brighter economy, pent-up demand boost auto sales

Auto sales are trending upward at dealerships in Washoe County, and regional auto executives point to rising consumer confidence and a pent-up demand for new vehicles as driving factors for their rise in revenues.

Residents of Reno-Sparks who spent five long years grappling with falling home values and skyrocketing unemployment through the recession held on to their older vehicles. But as the regional economy rebounds people are flocking to dealerships on Kietzke Lane and elsewhere for new wheels as unemployment stabilizes and home values once again trend upward.

Year-over-year sales at Champion Chevrolet rose more than 40 percent in January and February, owner Jack Stanko says, and Champion ended the first quarter up 34 percent versus the same quarter in 2012. Ryan Dolan, chief executive officer of Dolan Automotive Group and northern Nevada president of the Nevada Franchised Auto Dealers Association, says sales at Reno Toyota rose between 25 and 30 percent in the first quarter.

Bill Artemis, general manager of Bill Pearce Courtesy Honda, says overall sales ticked up 10 percent in the first quarter, and sales of the newly redesigned 2013 Honda Accord are up nearly 40 percent. Ken Alexander, general manager of Reno Buick GMC Cadillac, expects a 20 percent increase in sales throughout the year. Sales at Reno Buick GMC Cadillac climbed roughly 25 percent in 2012 from the prior year, Alexander notes, mostly as a result of adding the Buick and Cadillac brands.

Many car buyers are trading in older vehicles for newer models rather than pay for significant repair costs, part of a greater national trend. Dolan says that prior to the recession the average age of cars in Nevada was roughly 39 months, or 3.5 years. However, the average age of the 240 million cars and light trucks on U.S. roads reached an all-time high of 10.8 years in 2011, says R.L. Polk Co. of Southfield, Mich., an auto-industry data expert and owner of Carfax.com.

“There is a real pent-up market out there,” Champion’s Stanko says. “We are getting a lot of vehicles where people have waited a couple extra years to trade in.”

That delay in trade-ins over the past few years has created a shortage of used-car inventories, which pushes used vehicle pricing higher and can make the price of a new vehicle more attractive when coupled with a dealer rebate, auto executives say. Also, Honda’s Artemis says, General Motors, Chrysler and Ford didn’t lease as many vehicles during the recession, further compounding the shortage of used cars for resale.

“It makes new cars more in demand,” Dolan says. “With a trade in they’ll get a lot more money than normal, and people are seeing the opportunity to get into a new car.”

Dolan Automotive Group opened its high-profile Reno Toyota dealership facility in September 2009, just as new car sales began sagging in northern Nevada. Average monthly sales in March trended upward as much as 87 percent versus monthly sales volume during 2009 and 2010, Dolan says. As long as key sectors of the regional economy continue to rise, the rest of the year could shape up nicely, he says.

“The outlook is very bright; as long as the construction business continues to go and other economies in our community continue to go that will drive big purchases such as a car. You can’t make a whole year in one quarter, but we are definitely excited where we are from where we have been.”

Despite the positive gains in auto sales, Reno still has a long way to go, Alexander notes. The regional economic recovery lags well behind many parts of the country. Year-over-year vehicle sales are expected to increase significantly across the country, he says, but northern Nevada’s gains will be more modest in comparison.

With the rise in sales dealerships also have increased their sales staff. Alexander and Champion’s Stanko also point to an air of increased consumer confidence among patrons at the Reno Auto Show in February at the Reno-Sparks Convention Center. Whereas in the past few years patrons attended the event primarily just to kick some tires, attendees at this year’s show expressed sentiment that they would buy in 2013.

“It’s not a hard-sell atmosphere,” Alexander says. “You are out there touching 20,000 to 30,000 people coming through that show, and you can really hear the people talk. We heard a lot more buy messages out of that show than we did in prior years. There is some optimism and some growth out there.”

Lending is another piece of the puzzle that’s helping spur auto sales. Credit unions and other lenders are more willing to loan to lenders with less-than-perfect rates or lenders with foreclosures on their credit history than in past years, auto executives say. Prior to the wave of national foreclosures and short sales, such blemishes were barriers to purchasing new vehicles, but lenders have relaxed their standards on creditworthiness, and interest rates have fallen in kind as well.

“Most lenders have taken the approach that if you had a foreclosure or a short sale, it was something beyond most people’s control,” Stanko says. “I don’t think it is hurting them as far as approvals. Years ago it was a major criteria; today that is not case — they are looking more at income and time on job.”

Adds Alexander: “Forgiveness comes a little quicker today for those people. They can move back into a vehicle loan much quicker than they could in the past.”