It's an autumnal rite, the auto industry's equivalent of a housecleaning, as car dealers struggle to get rid of last year's models before new ones fill up their lots.
With inventories of new cars and light trucks at an all-time high of 3.7 million units nationwide, automakers have few options this season but to jack up the special deals they offer to move unpopular or overstocked 2004 models before the 2005s arrive.
For The Record
Los Angeles Times Saturday September 11, 2004 Home Edition Main News Part A Page 2 National Desk 1 inches; 57 words Type of Material: Correction
Auto incentives -- An article about car sales in Friday's Business section said that an unsold vehicle sitting on a dealer's lot for 60 days can cost the dealership $2,400 in interest charges. That sum represents not only the financing of vehicle inventory but also operating costs such as mortgage payments, wages, insurance expenses and utility bills.
"You can sell any car if the price is low enough" said Fritz Hitchcock, who peddles Fords, BMWs, Toyotas, Hondas and Volkswagens at six Southern California dealerships.
Paring the backlog is crucial because most dealers borrow to finance their inventories. It costs an average of $40 a day to keep a car or truck around, so a vehicle that isn't sold after 60 days eats up $2,400 in interest.
At the moment, Ford Motor Co.'s dealers nationally are taking an average of 76 days to turn over their inventories, compared with 74 days for DaimlerChrysler's Chrysler Group brands and 72 days at General Motors Corp.'s dealerships, according to Ward's AutoInfoBank.
"People were expecting a stronger economy, and we ordered aggressively," said Michael Maroone, president of AutoNation Inc. The Ft. Lauderdale, Fla., company is the nation's largest new-car dealership chain, with 318 stores, including 42 in Southern California. "But we figured the manufacturers would support us with aggressive incentives on the 2004s at the end of the model year, and they have."
At AutoNation's Power Chevrolet Irvine, more than 200 gas-guzzling Chevy Suburbans were in stock as the Labor Day weekend began. To trim that number, the dealership cut prices by as much as $7,300. And that was before applying GM rebates that could save an additional $5,000, producing a total discount of as much as 30% from the $41,250 sticker price of a fully loaded Suburban.
The dealership sold about 50 Suburbans last weekend, said general manager Larry Smith, who noted that the big price breaks would continue.
Said Paul Ballew, head of market analysis at GM: "The dealers are our customers, and we don't make any money if they aren't ordering our cars. That's why you're seeing these aggressive incentives."
Cash rebates and incentives have become commonplace in the automotive business since GM started using them heavily to spur sales after the 9/11 terrorist attacks. Ford and Chrysler Group joined in, with European and Japanese automakers adding them as well.
