By Angelo Young - Automakers tend to begin a year flush with inventory as cold weather and post-holiday doldrums keep many buyers away from dealer lots. But this past January inventories jumped by double-digit percentages for all of the top eight automakers, except Nissan, with the result that new car customers are finding bargains.
Overall inventories are higher now than they have been since August 2009, prior to the 18-month U.S. recession that kicked off in December of that year and sent the industry reeling. Right now it’s easy to blame the weather for unhealthy inventory levels that can lead to production cutbacks and slimmer profit margins for automakers and dealers. That will not be the case with the arrival of spring.
Combined, the number of days it would take for the “Big 8” automakers to sell out of current stock stands at about 94. On average, a level above 60 days is considered too high. Four of the eight manufacturers – Fiat Chrysler, Ford, General Motors and Volkswagen – entered February with inventory levels above 100 days’ supply.
The average percentage growth for these manufacturers stands at 19 percent from last year, according to WardsAuto, with all but Toyota and the South Korean sibling companies Kia and Hyundai at levels below 80 days.
The question is how much of this increase is due to the winter storms that battered large parts of the United States and how much of this growth is attributed to a possible slowdown in demand.
“Inventory levels always rise in January, though the cold weather last month clearly exaggerated the effect,” said Karl Brauer, senior analyst at automotive information and pricing provider Kelley Blue Book. “It’s too early to know if this represents a larger, fundamental issue or a short term bubble that will work itself out naturally.”
One thing is certain, though. With supply up compared to last year, manufacturers will be boosting deal-sweeteners to lure buyers as winter winds down and the nation heads into spring.
“Bad weather will result in a short-term spike in incentives,” said Eric Lyman, vice president of editorial and consulting for ALG, which tracks the North American automotive market. “The danger is that this could be the beginning of an escalating arms race for market share.”
This escalating arms race would be good for buyers because it means more rebates, lower prices and lower down payments on zero-percent financing. If inventories continue to reflect the trends seen so far this year, it would be somber news for an industry still selling at rates lower than pre-recession levels.
“It’s important to keep in mind that one month does not indicate a trend,” said Steven Szakaly, chief economist of the National Automobile Dealers Association. “January is typically the lowest sales month of the year for new-vehicle sales, and the bitterly cold and stormy weather in several regions of the country have clearly compounded what is a slower sales month. If we don’t start to see some improvement by early March -- which we do expect to improve -- then we can be concerned.”
Meanwhile, the auto information and pricing provider TrueCar released Wednesday its list of best deals for the month, based on an analysis of its national database of listings.
Here are some of the best lease and finance deals out there right now. They expire on March 3:
Lease
2014 Fiat 500L: $199/month for 36 months, $2,699 down, 12,000 miles/year
2014 Honda CR-V: $219/month for 36 months, $2,499 down, 12,000 miles/year
2014 Volkswagen Jetta: $149/month for 36 months, $2,349 down, 36,000 miles
2014 Toyota Tacoma, 4X2 DoubleCab: $289/month for 36 months with $999 down, 12,000 miles/year
2014 Mercedes-Benz, CLA-Class Coupe: $329/month for 36 months, $3,623 down, 30,000 miles
Finance
2014 Toyota Camry: 0% financing for 60 months or $2,500 consumer cash
2014 Kia Forte: 0% financing for 60 months or $2,000 consumer cash
2014 Nissan Murano: 0% financing for 60 months
2014 Ford Explorer: 0% financing for 48 months
2014 Acura TL: 0.9% financing for 60 month.