Connecticut auto dealers are seeing a healthy rise in new car sales but claim to be vexed by a switch in the enforcement of property tax collections that is hampering their ability to do business.
“There has to have been some pent up demand from the economic cycle we’ve been going through,” said Arthur Schaller Jr., chairman of the CT Automotive Retailers Association. “People waited to buy a car until they finally had to. Sometimes the decision wasn’t optional.”
“There was no place to go but up,” said Schaller, citing 2009 car sales nationally of 10.4 million.
He said he’s conservative in his estimates for this year with the belief that nationally the total sales number could hover around 14 million.
“As a car dealer, I’d like to see it be 20 million but I want it to be sustainable,” said Schaller, who is president of Acura, Mitsubishi, Subaru and Honda dealerships in New Britain, Berlin and Manchester.
Used cars, though, aren’t seeing quite the explosive growth of new cars with sales flat or down slightly depending on which expert is talking.
“I wouldn’t say the growth of the new car market has been at the expense of the used cars,” said Schaller. “You go through phases where supply shrinks [and] people extend the ownership cycle.”
It’s that extended ownership cycle that kept consumers out of the market during the down times of 2009. “You have a five-year-old car that needs repairs, you have a choice to fix it but at 10 years you might make the decision to get rid of it,” he said.
Schaller said rising gas prices aren’t driving too much business toward sub-compact cars but he has been selling Mitsubishi’s MiEV, the automaker’s electric car. “The American public is growing in its appetite for that segment of the business,” he said.
James Fleming, president of the Connecticut Automotive Retailers Association, said Connecticut is “very much a mirror with what’s going on across the country for car sales.”
But in spite of record sales, there is still a wait-and-see attitude among consumers because of two men named Obama and Romney. “What my dealers tell me is when you’re coming up against presidential elections, people get nervous about making a commitment to a long-term debt, whether it’s a car or a house.”
However, it doesn’t matter who wins, said Fleming, a former state senator and commissioner of consumer protection. Car sales will go up regardless of who is elected.
The used car market had been pinched by a supply problem but that seems to be easing. “Supply is much better with new cars being traded in. That has really freed up the used car market,” said Fleming. When you’re out looking for a new car, you’re usually looking for something specific. Greater selection helps dealers meet consumer demands.
National new-car sales are expected to hit 14.5 million, based on latest estimates and a particularly strong sales month in August that saw a year-over-year increase of 20 percent.
“August car sales came in higher than many expected, not due to beefy incentives or plumped-up fleet sales, but on ordinary Americans buying new vehicles, especially small cars and pickup trucks,” said Michelle Krebs, senior analyst with Edmunds.com.
According to Edmunds figures, August sales totaled 1,284,743 vehicles, up 20 percent from August 2011. That put the seasonally adjusted annual rate (SAAR) of sales at 14.5 million vehicles, compared with 12.1 million last August. “In fact, August 2012 marked the best August sales in terms of vehicles sold and SAAR performance since August 2007, when sales were 1.5 million for a SAAR of 16 million vehicles. August 2012 also beat the Cash-for-Clunkers inflated August 2009 in terms of sales and SAAR,” said Krebs.
Car dealers are significant employers in the state with a workforce of about 12,500 employees at approximately 265 dealerships.
“The trend is we’re adding dealerships back but given what happened with Saab, we evened out,” said Fleming. Connecticut had six Saab dealerships that were shuttered when the company went bankrupt.
Those are the only kind of dealerships closing their doors, Fleming added. “Dealerships used to just fold. Now other dealers are buying them,” he explained.
On the regulatory front, The CAR Association is upset by a change in Department of Motor Vehicle policy on registering cars to consumers with outstanding tax liabilities. For 18 years, the DMV allowed dealers to get 60-day temporary registrations for buyers with overdue property taxes. The balance had to be paid before the two months were up; otherwise, the registration became invalid.
DMV no longer allows that. Now a consumer has to settle a tax bill before getting any registration, which Fleming claims has hurt sales.
“People are walking out of dealerships [when they find out the cars can’t be registered] and not coming back,” he said. “This type of practice could put small, used car dealers out of business.”
The dealer group will try to get the General Assembly to overturn the DMV commissioner’s decision. Fleming said 40 percent of all registrations in the state are done through dealerships. Not allowing them to issue temporary registrations puts more consumers in motor vehicle department offices. “Dealers want to know why they can’t issue temporary plates like they do in every other state,” he said.
The state Department of Motor Vehicles is standing by its position that property taxes need to be paid before any registration will be issued, even temporary 60-day registrations. Ernie Bertothy, a DMV spokesperson, said the issue first came to light when the motor vehicles department was upgrading its computer system. The department wanted to erase the inequity that allowed dealers to get temporary registrations for people with outstanding tax liabilities while not allowing the same opportunity for a private seller and a buyer.
“Our view is if you owe property taxes, until the vehicle owner provides proof they have been paid, you can’t register a vehicle,” he said. “The law has always been the law.”
The DMV’s stance does nothing to increase collections, Fleming said. “People who owe either aren’t paying or stealing a plate and slapping that on their car,” he said. “We are not tax collectors.”
Fleming said car dealers are being singled out. “If you really want to collect taxes, you could do it in the grocery stores,” he said.
There’s also a fear of an eventual slippery slope of car dealers being required to enforce other laws, such as one that prohibits people from registering a car if they have outstanding child support due. Fleming said that probably hasn’t been enacted because the court system hasn’t been sharing the information with DMV.
