Auto dealers consolidate as customers opt for gas-thrifty models, used cars

The nation's car-selling industry – particularly in California, its No. 1 market – is going through what amounts to a natural selection process.

Evidence of this evolutionary process can be seen locally.

Today, after more than a quarter-century, Senator Ford at 3801 Florin Road stopped selling new cars, although it will continue selling used autos of all makes, expand rental-car operations and maintain its body shop.

Nearby Paul Blanco Chevrolet, at 3815 Florin Road, will cease operations once it sells existing vehicle inventory.

In both cases, the local dealers said they accepted consolidation buyout offers from the Detroit-based automakers that are pushing to reduce the ranks of dealers in cities nationwide.

Consolidation, essentially an attempt by domestic automakers to become leaner and more efficient in key urban markets, is a byproduct of brutal competition from foreign auto manufacturers. The urgency to consolidate has been exacerbated by a wobbly economy and a U.S. marketplace expected to see its third consecutive year of sales declines by the close of 2008.

Simply put, California motorists are buying fewer new cars in a time of nearly $4-a-gallon gasoline, and those being bought tend to be compact and decidedly fuel-efficient.

And there appears to be a bump up in local sales of used cars, with Sacramento-area buyers looking for nicely maintained cars that sell for thousands less than they would pay for a new model.

The Golden State's consumer habits reflect national trends cited by multiple auto industry watchers: Motorists are holding on longer to the cars they own. Increasing numbers of new-car buyers are seeking small models that get good gas mileage. And, used cars currently are selling at better rates than new ones.

Experts say that's what you get when gas costs soar on record-setting oil prices, discretionary income shrinks and tight credit prompts consumers to hunker down and hold off on major expenditures.

"Basically, here's what has happened: Thirty- to 45-year-olds have dropped out of the market. They're holding onto the cars they have," said Art Spinella, president of CNW Research in Bandon, Ore., where he tracks auto industry trends nationwide. "That's easier to do now than it used to be, because today's cars are built better and last longer.

"What's also happened is that people (age) 55 and up have become big buyers of small cars. And people under 30 are also buying small cars. So, that's pretty much what's going on with small cars."

Spinella noted that the 30-45 age group holding off on buying is "a key demographic. That's a good third of the car market."

Bill Thompson of Sacramento said he was among those struggling with whether to purchase a new car.

"I really, really want a new car, but it will stretch our budget even more to get one," said Thompson, 38, as he strolled among new Nissan models at the Elk Grove Auto Mall. "I've always bought new, but, yes, I am thinking of getting a good used car that has been gone over and feels like new."

Thompson has company on that score. Local dealers are reporting generally good sales of certified used vehicles – those that have been gone over bumper to bumper, improved to a predetermined standard and had old or worn-out parts replaced.

"For the year so far, we've had a slight spike in certified sales on the Toyota and Chevy side, " said David A. Rodgers, senior vice president and general manager of the John L. Sullivan Automotive Group in Roseville. The group dealerships include John L. Sullivan Chevrolet and Roseville Toyota-Scion in the Roseville Automall.

Even dealers of upscale vehicles – normally a recession-proof niche that includes buyers with high incomes – seem to be getting a bump in certified used sales.

"In our segment, the new-car business is being impacted more than the used-car business," said Rick Niello, president of the Sacramento-based Niello Co., with 13 Northern California dealerships that sell high-end brands such as Audi, Acura, BMW, Infiniti, Maserati and Porsche. "We're running behind last year's pace in new cars, but things are about the same in used cars."

About the writer:

• Call The Bee's Mark Glover, (916) 321-1184.