Dealers note shift in buying habits: most keep a steady course.

Car dealers in the greater San Fernando Valley seem to be weathering the storm of skyrocketing gas prices, rising interest rates and general economic uncertainty that has been swirling around this year.

Incentives in the form of no interest loans and a shift in purchasing habits continue to bring in customers.

"We're seeing a lot of optimism in the marketplace," said Steve Livingston, owner of two dealerships in Woodland Hills.

Of the dealerships that make up Galpin Motors, sales are down at Ford, Jaguar and Volvo but Mazda and Saturn are bright spots, said President Bert Boeckmann.

"We're pretty much where the market is," Boeckmann added.

According to the 2005 year-end report from the California Motor Car Dealers Association, new car sales increased five of the past six years, the one exception being 2003.

Just less than 17 million new cars were sold in the state in 2005, generating about $75.6 billion in sales. An additional $14 billion came from used car sales.

Franchised new car dealerships accounted for approximately 19 percent of all retail sales within the state.

Nationally, 2005 ranked third out of the seven best years for new-unit sales by franchised new-vehicle dealers with $699 billion, a two percent drop from 2004. California had the fourth highest average dealership sales figure with $55 million.

So far for this year, sales are down 2.4 percent from the same period last year, said Tom Libby, a senior director of industry analysis with the Power Information Network, a division of J.D. Power and Associates, based in Westlake Village.

A myriad of factors contributes to the decision on whether to purchase a new vehicle and what kind including rising interest rates, general economic conditions, and the price of gasoline.

"Generally, people are less apt to commit now than maybe a year ago when interest rates were at an all time low because now they are increasing," said Reggie Louie, operations manager of Pacific BMW in Glendale. "People are a little more uncertain. But the BMW highline product is not as adversely affected as say a GM or Ford."

At Galpin Ford, what had been seen as a 10-day supply of the Ford Escape hybrid vehicle sold out quicker than expected, Boeckmann said.

"When (gas) prices go up or there is a shortage they always migrate that way (toward buying fuel efficient cars)," Boeckmann said. "Not always in huge numbers but significant enough you see a change in the mind patterns and you are now seeing a little bit of that."

The CMCDA report also found customer incentives spurred new sales in 2005, including rebates, low-interest financing, employee pricing and lease options.

Incentives continue to play an important role in 2006.

A J.D. Power and Associates study released July 21 found that nearly 63 percent of new-vehicle retail transactions in the first 16 days of July included a loan, an increase from the 57 percent in June and 55 percent in May.

General Motors scored big over the Fourth of July holiday time period with nearly 78 percent of retail transactions including a loan, the study found.

Volkswagen has been pushing its leases in order to compete with Toyota and Honda.

Lease vs. buy

John Nguyen, general manager at Livingston Volkswagen in Woodland Hills, said there is the perception that if a driver spends a lot of time behind the wheel there is little sense in leasing when the contrary is actually probably true.

"If you do drive a lot you don't want to own something 100 percent and have it depreciate," Nguyen said.

Earlier in the summer both Ford and General Motors offered subsidized gas prices to lure buyers into showrooms to purchase a new vehicle. Ford's "Drive on Us" program gave the buyer a $1,000 prepaid debit card for gas purchases, while GM's "Fuel Price Protection" was targeted at buyers in California and Florida of the Chevrolet Tahoe and Suburban, the GMC Yukon and Yukon XL and the Hummer H2 and H3.

But at least one Valley dealership finds that the price at the pump doesn't deter its base of repeat referral customers.

"If gas is $4 gallon or $2 a gallon we have a pretty good referral and customers we've had for years," said Mike Mayberry of Mayberry Lincoln-Mercury, in North Hollywood. "We're a family owned business and even during tough times it still seems to go along right as it always has."

With the price of gas, some drivers look to hybrid vehicles as a means of transportation. Dealers also sense a shift away from the larger sport utility vehicles.

A Power study released in January predicted that hybrid sales would grow by 268 percent between 2005 and 2012.

But the study found that the market share of hybrid-electric vehicles will remain small, growing from 1.3 percent in 2005 to 4.2 percent of the market by 2012.

Trade-in trouble

But the switch from a large SUV has become a bother for some dealers in terms of not coming to terms on the trade-ins.

"We are having trouble making those deals because the market is just not there for the car," said Don Fleming, of Valencia Acura, where sales are down about 12 percent.

BY MARK R. MADLER

Staff Reporter