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Disappearing dealers.

In the past, new automobiles out-sold used ones almost four to one. Today, many dealers in Arkansas and across the nation are selling more used cars than new cars.

Dennis Jungmeyer, president of the Arkansas Automobile Dealers Association, says the change is due to economic conditions and the emergence of program cars.

"Program cars are the new element in the marketplace,' Jungmeyer says. "They are rental company buybacks."

After using a fleet of new cars for a specified number of months or miles, rental companies sell the cars back to the factories. The used program cars are then sold to dealers.

A program car may be a very good buy for some consumers.

"Dealers can buy program cars from the factories, pass considerable savings along to the consumer and still make a better profit than they can on new car sales," Jungmeyer says. "Program cars have changed the market tremendously."

On the surface, program cars seem to be a good deal for everyone, but Jungmeyer says they have eroded the franchise market. New car sales have suffered, hurting dealers and impacting factory profits.

"Factories don't benefit from program sales," he says. "They benefit most from selling new metal."

Another change in the automobile industry has been the introductions of cash rebate incentives and interest rate incentives for new car purchases. Financial incentives are both relatively new to the auto industry, evolving over the past few years.

"They came about because dealers and factories needed to stimulate sales," Jungmeyer says. "They were necessary. But incentives also had a negative effect on the auto industry, giving buyers the attitude that if they wait long enough, factories will offer a better deal."

According to Jungmeyer, dealers have been caught right in the middle of the incentives battle.

"Customers ask if there is no incentive now ... will there be one in a month or two?" he says. "Dealers don't know. They have to say it's a possibility and the customer delays the purchase.

"From the dealer's perspective, factories have got to work themselves out of this situation. But incentive programs are showing up again in 1993. The new models are out and factories are already offering incentives."

Car Wars

The slump in the auto industry has forced many small dealerships to close their doors during the past decade, giving way to large, metropolitan dealers that carry multiple vehicle lines.

Another new type of sales activity has been dubbed car wars.

Multiple dealers join forces in a large, easily accessible area and display their wares -- new and used cars and trucks parked side-by-side for consumer convenience.

Pressure is low. Deals are immediate. On-the-spot financing and credit approval are available. And, buyers drive away in newly acquired vehicles.

Car wars or collective dealer auto sales, like the recent event held in Little Rock's War Memorial Stadium, are the hottest thing in the country, Jungmeyer says.

A dozen dealers sold more than 400 cars in three days at the War Memorial sale last month.

"We're just getting into collective auto sales in Arkansas," Jungmeyer says. "There will be more. It's a heck of a buy for consumers."

Two significant consumer changes have occurred. Buyers are financing new cars for longer periods of time and the small neighborhood dealers are disappearing.

The domestic car versus foreign car issue is no longer viable, Jungmeyer says.

"The quality of American vehicles has improved drastically over the past five years or so," he says. "We've caught up. We've got cars on the road now that will compete with any car in the world."

In strict manufacturing terms, the American-made car no longer exists.

"I would be hard-pressed to name a single American car that has all components manufactured and is assembled completely in this country," Jungmeyer says. "The reverse is also true. Cars that many buyers think are foreign are either manufactured or assembled here ... or both. A lot of Toyotas and most Hondas are manufactured in the United States."

What is the current status of the Arkansas auto industry?

"It's been a rough few years, resulting in a radical thinning out of the dealer population nationwide and, particularly, here in Arkansas ...," Jungmeyer says. "Over the last 18 months, we've lost 30 dealers.

"Over the last 12 years, we've gone from 434 dealers to about 280 dealers statewide and we haven't bottomed out yet. I don't like seeing the neighborhood dealers disappear.

"I think many consumers enjoyed going to that small dealer on the corner who knew your first name and knew all of the answers to product questions."
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Title Annotation:Arkansas Business Rankings; automobile dealers in Arkansas decrease due to slump in new car sales
Author:Fincher, Carol
Publication:Arkansas Business
Article Type:Industry Overview
Date:Oct 12, 1992
Previous Article:Gearing up the company.
Next Article:Playing monopoly.

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