Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Wed, May 6 1992 Date: Wed, 6 May 92 05:32:34 EDT Message-ID: 05-06 0000 BONUS: Auto sales remain at a crawl USA TODAY Update May 6, 1992 Source: USA TODAY:Gannett National Information Network A widely anticipated spring wave of auto sales so far has been just a ripple. The engine for recovery is fueled: Interest rates are low, rebates abound and dozens of new car and truck models - 17 from General Motors alone - adorn the USA's showrooms. Still, sales are crawling in first gear. In April, car and truck sales rose just 10% from the dismal postwar 1991 period, thanks mainly to strong truck, minivan and sport-utility sales. Overall, truck sales jumped 21%, but cars, which still make up two-thirds of the vehicle market, aren't selling nearly as strongly. They edged up a disappointing 4% last month from April 1991. THE SALES GAINS AUTOMAKERS ARE EXPERIENCING AREN'T ENOUGH? The industry's annual selling rate is still stuck at a sluggish 12.4 million - the same number of vehicles sold last year. That's 23% below the industry's 1986 peak sales of 16.1 million - a year some analysts doubt will ever be repeated. "You've still got a long way to go before we're in a recovery," concludes analyst Michael Luckey of Luckey Consulting Group. WHY ARE SALES SO LACKLUSTER? Experts say sales are sluggish for four primary reasons: Sticker shock, continuing job fears, tight credit and cars' longevity. "People are just freaked out" by the prices on new cars, says Richard Webber, owner of a Bowling Green, Ky., company that supplies auto-repair shops. Today's stickers look particularly shocking to those who've been driving for two decades or more. In 1972, you could plunk down $2,679 for a Mustang LX. These days, the sticker exceeds $10,000. HOW HAVE CAR PRICES FARED AGAINST INFLATION? Actually, car prices haven't jumped much more than inflation in recent years. A 1992 car costs an average $16,700, up 30% since 1987. During that same period, consumer prices rose 22%. Yet the sticker prices on some popular models have soared: A 1986 Ford Taurus had a base price of $10,000. The 1992 version starts at $15,000 - a 50% increase. A Pontiac Bonneville that cost $11,000 now costs $18,000 - a 64% hike. Japanese carmakers have been steadily boosting prices for months: The Lexus LS400 has jumped $2,000 to $44,000 since January. WHAT HAS BOOSTED CAR PRICES SO? As carmakers are quick to point out, the 1992 models are superior in quality, containing 30% fewer defects than five years ago. Many are packed with standard features - such as air conditioning, V-6 multivalve engines and Bose stereos - that used to be optional. Uncle Sam also has forced carmakers to install air bags or automatic seat belts as well as sophisticated emissions-control equipment - adding an average $2,582 to the cost of a new car. "There's a lot of cost going into the product now (that) we have no control over," says Ford Motor Chairman Harold Poling. ARE CONSUMERS AWARE OF THESE CHANGES? Goodyear Tire & Rubber CEO Stanley Gault says no. He says car companies are largely to blame for not explaining those improvements. He says shoppers tell him they think they're test-driving the same car they bought last time - not a model packed with new features and safety gear. Pushing rebates "doesn't do much to really move the guy who has no interest in buying a car," says Dick Strauss, president of the National Automobile Dealers Association. "You can get somebody's attention when you talk about the features he doesn't have now." WHAT ROLE ARE JOB FEARS PLAYING IN AUTO SALES? Industry giants such as GM and Digital Equipment Corp. are still slashing employment. In a recent survey, four of five people polled knew people who had lost their jobs the past year. That scares potential car buyers who fear for themselves or a family member. "You can lower interest rates to zero, but if you as a consumer are afraid for your job, you're not going to take on any additional debt," says Toyota dealer Edd Snyder of Delaware, Ohio. WHERE DOES TIGHT CREDIT COME INTO PLAY? Stingy lenders are making it tough to get affordable car loans. Up to one-third of car-loan applications are rejected these days, dealers say. In the free-spending 1980s, banks and financing companies routinely made loans that covered the cost of a new car and the remaining balance on an old loan. And if a car seemed too expensive, lenders pushed extended-length car loans to reduce monthly payments. The national average car loan hit 56 months in 1988 - some luxury-car companies even offered 72-month loans on high-price models. WHAT ARE LENDERS DOING NOW? Now, dealers say lenders - fearful that buyers will default on loans - are making car buyers pay off their old loans and come up with at least 10% of the price of their new car before financing a purchase. Long loans are disappearing - the average length has dropped to 53 months. That's another blow to consumers: A $17,000 car, financed for 60 months at 9% (with $1,700 down), would have a monthly payment of $317.60; over 53 months, $350.91. Add that to the USA's average mortgage payment of $800, and you've wiped out two-thirds of the average family's income. HOW LONG ARE CARS LASTING THESE DAYS? High-quality cars built in the 1980s simply last longer, allowing people to run them until they literally fall apart. The average car on the road today is 7.6 years old - more than 30 million autos are 10 years old or older. David Kahne of Reston, Va., says he may trade his 6-year-old Ford Bronco next year on a Chevrolet Suburban, but he isn't in a rush. "I've always liked Fords, and mine will last a whole lot longer," he says. SO WHOSE DOING WHAT LITTLE BUYING THERE IS? Dealers say that about the only people who are buying new models now are those whose old ones have fallen apart. At Haywood-Clarke Buick in Richmond, Va., most trade-ins have more than 100,000 miles. Tim Thomas of Dayton has 300,000 miles on his 1979 Ford van. He repairs it himself and has no plans to trade it in because it "still runs fine." WHAT DOES ALL THIS MEAN FOR CARMAKERS? Despite those hurdles, carmakers are confident that a recovery is on the way - though they don't expect sales to roar back to record highs as they did in the years after the 1980-82 slump. Dealers reason that at some point, motorists will simply have to have new cars -because their old ones aren't going to last forever. "Eventually, you've got to trade them in," says Washington dealer Jack Pohanka, who owns GM and Honda franchises. "I just hope I'm still around when it happens." Bonus Editor: William Snoddy. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM