Car Dealerships Much Better Off Than Last Summer

New-vehicle dealerships in the U.S. employ roughly 1.1 million employees, according to the National Automobile Dealers Association. NADA said car dealerships “generate millions of dollars of tax revenue for state and local governments.” With the recession and the demise of many car dealerships, the U.S. economy has weakened.

Just a year ago, the auto industry was in trouble and W.Va. was one of the states affected by high gas prices, according to New York Times’ Clifford Krauss. He said, “The combination of low incomes, high gas prices and heavy dependence on pickup trucks and vans is putting an even tighter squeeze on family budgets.”

Now, a year later, Krauss said the national average for gas is almost $2.62 a gallon. The gas price increase from that of early 2009 has not helped struggling Americans who are dealing with other issues, like unemployment due to the recession.

Car dealerships in W.Va., Ohio and Ky. have lost some business due to rising gas prices. David Adkins, sales and Internet manager for Turnpike Ford of Huntington, said the dealership hasn’t received any trucks on recent shipments. The dealership receives an allotment of vehicles based on their sales and since truck sales have declined, Turnpike Ford will receive only compact cars on their next shipment, Adkins said.

Jerry Cole, new-car sales manager at Glockner GM Superstore said when gas prices increase, customers bring in their truck or SUV for trade-in. He said he hasn’t sold many fuel-efficient vehicles, though, because when gas prices hit $3 a gallon, sales decline. “A lot of it is psychological,” Cole said. He and Kirk Gillenwater, sales consultant for Bedford South Point Ford, said customers still need their vehicles, but they have to get over the “first initial shock” of rising gas prices.

Gillenwater said in Appalachia, “trucks are used for lively-hood.” He said Bedford South Point Ford has sold, “a whole bunch of trucks.” Trucks are used more in W.Va., Ohio and Ky. than in other parts of the U.S., he said. However, he pointed out a dilemma the dealership has run in to recently.

He said rising gas prices have affected the dealership by lowering the resale value of vehicles, especially trucks. Gillenwater said a low resale value benefits his dealership when buying trucks at an auction. He can purchase the trucks for a low cost and if gas prices decline, he can sell those trucks at the estimated retail value. When dealing with trade-ins, however, Gillenwater said he loses money to his customers when gas prices are high.

Car dealerships companies do not lose much money on gasoline costs, though. Adkins said his dealership, Turnpike Ford of Huntington, keeps a quarter of a tank full in each car on its lot for test-drives. Other than that, the dealership doesn’t spend money on gasoline. Adkins and Cole said new vehicles shipped from manufacturers cost nothing to the dealership.

After a customer has purchased a vehicle, the dealership fills up the tank upon delivery, Cole said. There is also the cost of fuel to ship cars to houses or other dealerships, but the cost isn’t enough to worry about, according to Cole’s light tone.

Glockner GM Superstore has its own oil company, Glockner Oil. Cole said he uses the oil tank on site to fill the cars with gas. He said it is an expense to fill the tank, but takes out the hassle of driving to the nearest gas station. The vehicles on the Glockner lot get Glockner oil.

Krauss said rising gas prices in rural cities hurt not only the car dealership industry, but also consumers. Now, since prices aren’t soaring like they were, dealerships are beginning to rebound. Some are even staying afloat with recent car sales. But if gas prices increase quickly again, it looks close several more dealerships.