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CNW: Recovery of Retail Markets Remains Regionalized

June 25, 2009

BANDON, Ore. — While the national sales numbers are daunting, a regional

look at the automotive retail environment tells a different story, CNW Research

revealed in its year-over-year comparison of four used-vehicle markets — New York, New Orleans, Phoenix and Los Angeles — for the month of May.

While New Orleans showed

improvement from its post-Hurricane Katrina economic slump by increasing volume

by 19.49 percent and used-car market share by 18 percent, Phoenix remained in a used-car depression

with sales falling more than 22 percent from May 2008 to May 2009.

And while the collapse of the housing market dented California’s automotive retail business, Los Angeles managed to increase its used

sales by 3.48 percent, reflecting a growing number of potential new-car buyers

jumping into the used-car market.

“While the national numbers are telling, looking at the used

market by DMA reveals the nature of sales more clearly,” wrote CNW’s Art

Spinella. “Generally, for example, the data clearly suggests that while Phoenix is suffering from continued economic turmoil,

especially in the housing market, New

Orleans is making tremendous gains as a place to see

pre-owned vehicles. And for all the negative talk about California’s

market collapse, Los Angeles is showing significant improvements versus 2008.”

Both franchised and independent dealerships increased sales in

New Orleans and Los Angeles. However, in New York, independents gained the upper hand

with a sales increase of 7.23 percent. Both franchise and independent

dealerships continued to suffer in Phoenix with declines of 18.51 and 20.21 percent, respectively.

Transaction prices for franchised dealers increased above

the national average of 2.22 percent in Los Angeles,

New York and Phoenix. On the other hand, transaction

prices for independent dealers fell from 6 to 8.6 percent in all four cities,

as dealers had to discount heavily in order to move vehicles.

All four cities also showed gains in transaction prices for

private party sales, which can be traced to a richer mix of vehicles, Spinella

wrote.

In terms of floor traffic, New Orleans was the only city to experience

an increase in shoppers at both its franchised (14.02 percent) and independent (3.90

percent) dealerships. Los Angeles franchised dealerships “drew nearly 17

percent more shoppers than a year ago, a possible indication that once used-car

demand is sated, new vehicles will see the same increased interest,” Spinella

wrote.

Additionally, there were significantly fewer buyers going

outside of their home city in all four markets, while nationally there was a 21

percent decline in “cross-town” buyers.

The number of units financed increased in Los

Angeles (16.84 percent), New Orleans

(34.91 percent) and New York (8.13 percent),

but declined in Phoenix (12.62 percent). The three improved cities also saw growing use of pre-approved

loans, even though the number of subprime buyers dropped significantly.

“It’s common knowledge that the auto business is highly

regionalized. California may suffer while Idaho booms,” wrote

Spinella. “On the used-car side, four marketing areas — New

York, New Orleans, Phoenix

and Los Angeles — are examples of just how local conditions can generate different results.”

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