The Pennsylvania Auto Show is a veritable ocean of high-octane engines, luxury interiors and the latest in automotive technology. All of it shines just so under the carefully positioned Auto Show spotlights. What car buyer could want more?
This is all very true if you're about to pony up for a spanking-new ride -- one whose virgin rubber tires have never touched the road.
But what if your budget is more in keeping with the lower-cost used-car market? Then, the automotive abundance represented by the PA Auto Show seems to shrink a bit. Sure, the Auto Show has its own used car section that seems big enough. You can even kick the tires, bargain the price and buy on the spot.
?Yet, even this belies an overall shortage of low-mileage, lightly-run used cars at car lots across the country.?
In far too many of those lots, one of rarest finds remains that used-car cream puff of old. You know the one. That shiny, softly used three-year-old car with less than 36,000 miles showing on the odometer?
It's a second-hand buyer's dream. A vehicle in which the first owner took the hit of most of the depreciation, while still leaving plenty of car for years of trouble-free service for a lucky second owner.
Only, these babies are in short supply at many car lots ? both across Pennsylvania and nationwide. And when you do find one, they tend to be cherry-picked as part of the dealership's certified pre-owned program. This means they come with top-to-bottom inspection checks, better financing and comprehensive warranties ? but also higher sticker prices.
So what gives with the short supply of great used cars?
Turns out, the used car market is another victim of the Great Recession. But not in the ways you might think.
When the economy went south, many car owners decided to put off purchases and continue to roll with whatever wheels he or she had. So much so, that the average age of the cars currently on the road is nearing a record-high of 11 years. Thus, millions of cars that would have long ago come in for trades are still trucking.
"There is a good market for vehicles over 100,000 miles," said Brett Corcoran, general sales manager with L B Smith Ford Lincoln in Lemoyne. "But a lot of dealers don't get into that market."
What worse, the credit crunch that grew out of the recession put a stranglehold on many car leasing programs. This choked off an important source of used car cream puffs ? all those three-year-old vehicles coming off lease.
All of this has actually raised the prices of prime used cars, which are now snapped up into dealer's select programs. Sure, you get warranties and financing that rival new cars. But you pay for it.
Otherwise , the used car market is stretched in the other direction. Namely, the high-mileage, take-your-chances end. Many vehicles have six-digits on their odometers.
Look for this to change as the economy continues to improve, according to area car dealers. New car sales are already accelerating, and leases are beginning to snap back into favor.
"Leasing seems to be back," declared L B Smith's Corcoran. "That is one of the avenues where Ford has really stepped up. There are more aggressive lease plans. That's an avenue to bring people into showrooms at a faster pace."
And when all those newly leased vehicles roll back to car dealers in three years' time, this will help re-supply used car stocks. But for too long, those lease deals were little more than a trickle. Indeed, some car companies all but halted these riskier transactions, where the triple burden of financing, depreciation and market softness all fall on auto manufactures.
"Leasing was the first thing to go when credit tightened up," explained John Hickey, president of Sutliff Chevrolet of Harrisburg, adding that Chevy was among the companies that slammed the brakes on leases.
"They just stopped leasing," Hickey said of the car company. "That was a huge disadvantage, and it still is. There is this two-year hole of lease vehicles. We are not getting those lease returns, so we are not getting those customers back in."
After all, when a lease expires, the lease holder needs another car. And the car he's turning in is soon bound for another buyer on the second-hand market. In other words, an entire auto ecosystem nearly ground to a halt.
Now, it's revving up.
"If you're a manufacturer, you are pushing them -- two- and three-year leases," Hickey said, comparing strategy to priming the pump for both new and used cars. "You're going to sell a bunch of cars three years from now."
But while auto dealers like Hickey see the wisdom in pushing car leases, the deals aren't always kind to the dealers, themselves. They lose out on the back-end service, as leasing customers put only the minimum amount of maintenance into their leased vehicles.
"I think the leasing is about the manufactures realizing it is good for them," Hickey said. "But it's not all good for dealers. How much (maintenance) work are you going to do, besides change the oil?"
It remains to be seen how high leasing can rev in the Central Pennsylvania car market. Car buyers here are known for their conservative nature and a driving determination to squeeze value from their vehicles. Thus, leasing was never as popular in the midstate as it is in other markets.
John Rickards, president of the Bobby Rahal Automotive Group Harrisburg, said leases never accelerated much beyond 20 percent of his business, even in the boom years. When the car market crashed after the recession set in, lease deals dwindled to less than 10 percent of Rahal sales. The recent two-year upward trend in car sales has leases back to about 15 percent of sales at the Silver Spring Twp. dealership.
"Leases have improved," Rickards said. "But in our conservative area, it certainly hasn't been embraced as much as the rest of the country."
But in time, the local lease trend could help bring balance to the cream-puff starved used car market. Say, in about three years or so.
Source: http://www.pennlive.com/midstate/index.ssf/2013/01/automobile_abundance_at_pa_aut.html
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