Dealer Survey Shows Some Positive Signs

Dealers are scaling back orders to right-size inventory and there are signs of stabilization in dealer order trends. About 34% of those surveyed intend to cut new-vehicle orders in the next 60 days, compared with 46% in the November-December survey.

Some 72% of dealers report “too much” new-vehicle inventory. This is down substantially from the previous survey, when 83% felt they were overstocked, but up significantly from 54% in the year-ago March 2008 survey.

Finance availability improved meaningfully from the November-December survey, with about 30% of dealers reporting an increase in the number of consumer finance options. This compares with only 3% reporting an increase in the last survey and 0% reporting such in the September-October survey.

Eighty-seven percent of the dealers surveyed report used-vehicle sales “above” or “in line with” their expectations, compared with 83% in the November-December 2008 survey. Because trade-ins have dropped substantially due to declining new-vehicle sales, about 58% of dealers believe they have just enough used-vehicle inventory, while 42% indicate they have too little. In the previous survey, 89% thought they had enough inventory and 6% had too little.

Parts and service operations have slowed, with 9% of dealers reporting fixed operations performance “above” and 51% “in line with” expectations. This compares with 14% above and 57% in line with expectations in the previous survey period. Many dealer executives mention traffic is down and consumers are limiting repair expenditures and postponing expensive repairs. But considering the decline in new-vehicle sales and the rise in the median age of passenger cars and light trucks, parts and service demand should rebound as 2009 progresses, the survey finds..