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Used-Car Dealers Shift Inventory Mix to
Combat Higher Gas Prices

June 26, 2008
By Rich Green
Editor, Auto Remarketing News Magazine

Dallas, Texas —As the economy continues to wilt and gas prices steadily rise with no apparent end in sight, more and more independent dealers are dramatically shifting their inventory away from gas-guzzling full-size SUVs and pickup trucks to smaller, more fuel-sipping cars. 

Auto Remarketing talked with 10 dealers from throughout the country just prior to the National Independent Automobile Dealers Association's Convention and Expo, which kicks off today and runs through Saturday. 

Dealers said they have definitely seen a corollary falloff in truck and SUV sales as gas prices continue their relentless march upward. They're not completely exiting that side of the business because there's still a market for those vehicles among certain segments of their customer base. But they are unequivocally, if not irreversibly transitioning to stocking their lots with economical fuel-efficient units. 

But though a dark cloud hovers over the industry these days, this group of dealers told Auto Remarketing that they still remain optimistic about their long-term future. They've adapted before and change will always be their mantra. 

Some even said they are detecting some slight signs of positive improvement and that bodes well for the long term. 

Here's a sampling of what's happening across the country. 

Manchester, Iowa 

James Harbach, of J's Auto Used-Car Super Center in Manchester, said his dealership used to display about 50 percent trucks and SUVs and 50 percent cars, but now his lot tilts 30 percent trucks/70 percent cars. 

"We still keep a fair amount of trucks because Iowa farmers still need to purchase them, but we have pretty much gotten away from SUVs," Harbach said. "Actually, the price of trucks is so cheap these days, it's almost foolish not to buy them." 

What's especially selling well? "Anything with a four-cylinder and gets good gas mileage," he said. "And those little cars have skyrocketed." 

Compounding Harbach's particular situation is the recent floods that have ravaged much of the Midwest. His store is about a 45-minute drive from the worst hit areas in Cedar Rapids and Waterloo, but his own area has not escaped the devastation. 

"We got flooded where I live three times, but it wasn't major like Cedar Rapids," he said. 

"However, all that has made it more stressful, and we just don't need any more stress," Harbach added. 

"Buying the right inventory is always a challenge, but this didn't help," he continued. 

"I know a lot of dealers will tell you that the car business isn't as much fun as it used to be. But all in all, our business has still been pretty good," Harbach indicated. 

Hebron, Neb. 

Donald Deepe, of 81 Automotive in Hebron, said he his pickup and SUV business have tailed off and activity is slow these days. He said he's still keeping some of these models around to sell to those farmers and construction workers in the area who need them, but he's definitely carrying more economy cars. 

Though Nebraska may not have been hit as hard by floods as Iowa has, Deepe said his state has been pummeled by tornadoes and hail. 

"I was at the auction recently and seemed like the calls were going pretty high because some dealers are having to restock their lots because of hail damage. So that's jacking the prices up," he explained. 

Unlike with past gas price hikes when people still bought SUVs, Deepe said he senses something different this time. 

"When gas went over $4 per gallon, I started getting a lot of calls for cars between $1,500 and $4,000, something that burns cheap," he observed. "People want to keep their pickup or SUV to take their families in, but they want something with more fuel economy to run around in that will get better mileage. 

"But I hate to buy the low-dollar stuff because I end up with so many darn repair problems with them," Deepe said. 

"It's a challenge to find those units, but that's what my market needs, so that's what I've got to do," he added. 

Redmond, Ore. 

Dan Nicholson, owner of Central Oregon Motors, said he would always kick himself each January and February because he had not purchased more trucks in December to get ready for a yearly spring push. 

So this past December, he said he was going to finally get ahead of the curve. So he loaded up with about 50 pickups. 

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