Last week automakers announced their August sales numbers, and the news was quite mixed. Even though most mainstream manufacturers posted double-digit declines over last August, the year-to-date sales are mostly up for all brands, with luxury brands showing significant strength.
It is no surprise that automakers are continuing to struggle amid the recession, with industry sales expected to be about 5 million vehicles less than just a few years ago. But the numbers look even more dynamic compared to this time last year, especially for those brands who benefited from the sales spike caused by the Cash for Clunkers program. Many consumers think that a rough time for sellers will mean more deals for buyers, especially with the model-year change over, but that may not be the case this fall.
Among the top automakers, the major Asian brands are having a tough year. Toyota is down one percent and Honda is up just one percent so far this year. The recall issues and safety concerns are the main reasons for Toyota woes; the automaker is working to turn its fortunes around, with an expansion of safety equipment on 2011 models and significant investment in marketing.
Despite the financial troubles faced just a year ago, the domestics are faring better with Chrysler up 10 percent, Ford up 14 percent, and GM up six percent so far for the first eight months of 2010.
One key industry change is the inventory levels. In 2008, August inventories t for GM were at a generous 82-day supply, in 2009 that dropped to 64 and this year it’s a more desirable 57. Ford was at an 83-day supply in August 2008, in 2009 down to 48, and now they have ramped up a little bit to 57. Chrysler was at 108 in 2008 and dropped to 40 in 2009 and now is maintaining a 55-day supply. (Some of the drop in inventory last year were from the Cash for Clunkers program cleaning dealers out of their fuel-efficient models and the impact of Chrysler and GM bankruptcy proceedings.) This puts domestic inventory in a much more comfortable place, with supply being closer to demand, though still above 2009 levels. Known for tighter inventories, Toyota and Honda have generally stayed the same through this tumultuous period, now at 51 and 49, respectively. So, what does that mean for car buyers this season?
Excess inventory leads to dramatic discounts. This fall dealerships will need to clear out the 2010 models, but as illustrated above, they may not be as anxious to do so as in years past. For consumers, this means less negotiating room and selection.
However, the remaining 2010s should still be priced well under the new 2011 models. Because the customer incentives won’t be as large, car shoppers should carefully consider the benefits and trade-offs before choosing to by a year-end model. After all, a 2010 car purchased now will essentially have depreciated a full year’s worth soon as it rolls off the lot. This wouldn’t matter to a person who holds on to cars for many years, or drives more than an average number of miles and may be concerned about trade-in value. For all other buyers, think twice.
Similarly, as the 2011 models are beginning to arrive, local inventories will be small and dealers are less likely to negotiate. Remember, they need to purge the lot of 2010s. Discounts on 2011 models may not emerge for a while, with the end of the calendar year the next time when you can count on big savings. (See our report "Should you buy an all-new car or a proven carry-over car?")
Whether you buy a 2010 or 2011, be sure to do your homework. Understand how the models do in Consumer Reports testing, safety evaluations, and reliability. But also look at what’s coming for the new models. Sometimes new features and performance are worth spending extra or waiting for. (See our Best new Car Deals.)
Use our New Car Selector to sort and filter by the factors that matter most to you, or dig right in to the detailed model overview pages.
—Liza
Barth with Jeff
Bartlett
