Robert Price: Car dealers get what FDR meant
| Sunday, Mar 08 2009 12:14 AM
Last Updated Wednesday, Mar 25 2009 06:16 PM
The cars are there. The buyers are there. And, Lord knows, the sellers are there.
What's the holdup? To Chuck Haddad, who's been on the front lines of the new-car business longer than almost anybody in Bakersfield, it's as plain as the hood ornament on a '66 Chrysler Imperial.
The problem is uncertainty, anxiety, trepidation. Fear itself. Not the sort of emotion that inspires people to grab the spouse and the pink slip to the Matador and dash out to the auto mall.
Haddad, who opened his first Bakersfield automobile dealership in 1973, doesn't see any truly compelling reasons for all the concern.
"Things seem worse than they really are because of fear," said Haddad, sounding a little like Franklin Delano Roosevelt, who famously fingered the same economy-stifling sentiment some seven decades ago. "That's all it is. Fear."
Nobody should be surprised that emotion, rational or otherwise, is capable of keeping customers away, to the overwhelming detriment of the local economy. It's emotion that brings them in, too.
"Our business has always been emotion driven," said Chad Manning, sales manager at Jim Burke Ford. "Who's more excited than when they first buy a new car? Nobody. But when people are having to think, 'Where am I gonna be tomorrow?,' that emotion dries up, and then it starts competing with negative emotion. People don't want to make the wrong decision. They get paralyzed. And then what have you got?"
What you've got is a month like February, one of the toughest in recent memory for Bakersfield automobile dealerships. The irony is that while crickets chirp out on the deserted blacktops of local dealerships, consumers are missing out on an unusual window of opportunity, created in part by the state Legislature.
The recently enacted state budget includes a sales tax increase of 1 cent on the dollar, but it doesn't kick in until April 1, when the rate becomes 8.25 percent. And on May 19, the vehicle license fee jumps from 0.65 percent to 1.15 percent.
The combined effect, using a new, $35,000 vehicle as an example: an additional $525. In other words, hurry up.
But there is good news in all of these governmental maneuverings, too. The American Recovery and Reinvestment Act, which became law on Feb. 17, includes a new federal income tax deduction for taxes paid toward a new, qualifying vehicle during 2009. It's an above-the-line deduction, so buyers don't need to itemize to claim it. (OK, now pretend that I'm talking really, really fast like that voice at the end of radio commercials: Your vehicle must cost less than $49,500, and the buyer's modified adjusted gross income must be less than $125,000, or $250,000 for joint filers.)
Automotive sales matter in cities like Bakersfield because dealerships are typically major contributors to the local tax base. About 13 percent of the taxable transactions applied to Kern County's budget comes from car sales, making it the top contributor by type of business.
So when car dealers suffer, we all feel it.
Unwarranted negativity isn't the only problem, of course. Many dealers are concerned about the consumer-loan pipeline, which is still a little clogged, despite some successful recent efforts to unclench lenders' fists.
Nobody is minimizing the impact of the double-digit unemployment rate, either. It's real enough. But negative emotion gives the issue added weight.
"I know unemployment is over 10 percent," Haddad said. "But that means the employment rate is still about 90 percent. If sales are down 50 percent and unemployment is up 5, how does that make sense? It doesn't."
Eliminate the negativity and circumstances are suddenly ripe for a run on local car dealers. Car makers have come up with assorted incentive packages, and dealerships are borderline desperate.
If only the mood were right. And mood is the main stumbling block here — for some, maybe the only stumbling block.
Reach Robert Price at rprice@bakersfield.comor www.stubblebuzz.com.
