Automakers See Best Vehicle Sales in August Since 2003

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Car Dealerships Ahead Of Total Vehicle Sales Figures
Craig Warga/Bloomberg via Getty Images
By Bernie Woodall and Ben Klayman

DETROIT -- August auto sales were the highest for that month in more than a decade, thanks in part to heavy discounting by the manufacturers and a strong Labor Day weekend close, with the industry selling at an annualized pace not seen since early 2006.

All the major manufacturers except General Motors (GM) reported year-to-year increases, handily topping analysts' expectations.

August sales rose 5.4 percent from a year ago to 1,583,476 vehicles, according to a Reuters analysis. It is the highest total for the month since the industry sold 1.63 million in August 2003.

GM held on to the top spot, while Toyota Motor (TM) edged Ford Motor (F) for the second straight month.

The lowest gasoline prices in four years helped GM and Chrysler Group, a unit of Fiat, achieve double-digit gains in sales of full-size pickups, which provide the bulk of profit. But sales of Ford's industry-leading F-Series pickups fell as the automaker began the changeover to an all-new aluminum-bodied version.

The annualized sales rate for the month finished at 17.53 million vehicles, according to research firm Autodata. That was well above the 16.6 million forecast from analysts polled by Thomson Reuters and the highest rate since 17.6 million in January 2006.

Auto sales are an early indicator of consumer demand as the industry accounts for one-fifth of all U.S. retail spending.

GM sales fell 1.2 percent to 272,423 vehicles; analysts had expected 272,734. Toyota was up 6.3 percent to 246,100, beating the forecast of 225,973. Ford was up 0.4 percent to 222,174, against the expectation of 216,991.

Chrysler showed a 20 percent gain, to 198,379, compared with a forecast of 185,072, while Nissan Motor was up 11.5 percent to 134,388, versus an expectation of 123,855. Honda Motor (HMC) climbed 0.4 percent to 167,038, compared with 152,191. Hyundai Group sales, including Kia, rose 5.5 percent to 124,670, compared with a forecast of 117,765.

Incentive spending by the industry last month climbed from a year ago, to an average $2,772 per vehicle, but declined slightly from July, according to research-firm TrueCar.com. Virtually all major automakers except Nissan boosted discounts from a year ago.

Research-firm Edmunds.com said August sales were helped by a higher percentage of zero-interest dealer-financed loans.

Transaction prices in August averaged $32,495, driven by strong sales of pickups and full-size SUVs, according to research-firm Kelley Blue Book.

Beau Boeckmann, president of Galpin Motors in Southern California, said one surprise for dealers is "that SUVs have really taken off again."

Larry Dominique, an executive at TrueCar, said the shift in demand from sedans to SUVs and crossovers is forcing manufacturers to hike discounts on sedans.

-With additional reporting and writing by Paul Lienert.

Automakers See Best Vehicle Sales in August Since 2003
When you get into that back office and start signing all the paperwork, the topic of extended warranties will come up pretty quickly. Ellie Kay, an author of 15 finance-related books, notes that such warranties are negotiable.

"Before you sign on the dotted line, check out other sources of extended warranty pricing," she says, such as those provided by your bank or insurance company. "Then either use this lower price in the financial and insurance office for negotiation to get them to match the price, or buy it from the other source."

A scenario from Kay during her last car purchase: "The dealer quoted me $4,200 for a three-year extended warranty for my 280SLK Roadster Mercedes that included a $250 deductible. USAA -- my insurance company -- gave me a three-year warranty for $3,200 with zero deductible. I've used the new warranty once already. The bill was $1,100 and I paid nothing because of the zero deductible."

Bottom line: The default extended warranty is almost always the worst deal.
You may have a monthly payment figure in your head when shopping for a new car, but your interests are better served when you focus on the out-the-door price instead.

"A sales rep can often trick you by offering a lower monthly payment, but [one that] will stretch out the terms of the loan," says David Bakke, a car buying expert at MoneyCrashers.com.

You can reduce the overall cost of the car via negotiation and by skipping accessories and add-ons. "Things like navigation systems, rims, floor mats or car audio/entertainment systems can be purchased from a third party vendor, usually for less."

All our experts agree: Don't even mention your preferred or maximum monthly payment price.
If you decide to trade in your current vehicle for another, Kay says to negotiate this apart from the price of the new car and only after you've negotiated everything else. You can learn the full value of your car by going to Edmunds.com or kbb.com. Once you know what the car is worth, don't settle for anything less. Kay also advises you to seriously consider selling your old car yourself, and applying what you get toward the principle of your loan.
It may be tempting to just head to one local dealership, take a test drive or two, and walk out the door with a new car, but you'll save yourself a lot more money by doing a little pre-shopping research.

"Once you have your choices narrowed down to a few makes or models, contact the Internet sales manager of a few dealerships," suggests Bakke. "These folks can often offer better pricing than what you'd find dealing with an on-site sales person. Plus, you save time."

In addition to, or in lieu of, e-shopping, Joshua Duvall of Capital Financial Services says to "find a few vehicles from different manufacturers and pit them against one another." He explains that the car buying market is based on quantity and the fact that dealers want to move cars. "Force them to compete for your business."
"Dealerships often employ hard-sell tactics that can be overwhelming for a first-time buyer, so it is a good idea to go with someone who has been through the process before," explains John Ganotis, founder of CreditCardInsider.com.

Granotis also says that if you're buying a used vehicle, it's wise bring along a friend who knows his or her stuff when it comes to car health. For example, a mechanic who can peek under the hood, or recognize if something subtle is wrong during the test drive, would be especially handy.
You've likely heard it before, but we have to repeat this fact: Buying a used car is almost always a better value compared to buying new. If you like a particular model, buy the same car, but a year or several years older. Unless there have been major body changes, you'll hardly be able to tell the difference.

OK, so sometimes ol' Sally breaks down, and you need to get a new set of wheels, stat. If you don't fall into that category, though, our experts recommend choosing your purchase date strategically, such as during a major sale. Better yet, wait for the end of a promotion.

Dealership salespeople often receive a bonus if they meet their targets during a promotion. Even if they lose money on a vehicle at the end of a promotion, they typically make up for the loss with their promotion target bonus.

Erin Konrad of CouponPal suggests buying near the end of the month. This is when salespeople are trying to meet monthly quotas and are more likely to negotiate.

Be familiar with common strategies employed by dealerships and sellers. For example, MSN Money warns against the "four-square" trick. (I've had this one used on me.) In this trick, the salesperson draws four boxes with a number in each: your old car's trade-in value, the new car's price, the down payment, and your monthly payment. "From there, the salesperson begins crunching numbers -- most likely making it too hard for you to follow," writes MSN. He or she will shift your focus to the monthly payment, which can result in a longer loan and a higher interest rate.

Another common trick is to heighten your sense of urgency, says Business Insider via Gregg Fidan, founder of RealCarTips.com and the author of "Honest Guide to Buying a Car." For example, the dealer may tell you "that color is not available; there's only three left statewide; the price is good only for today; someone else is interested in the car, better decide quickly, etc." In this case, be patient and courteous, but remain level-headed and never rush to buy. Study up on Fidan's list of 112 car-buying scams.

To sum up the list: Don't let yourself get too caught up in the excitement of shiny metal, and remember that in six months that "new car excitement" will have faded, and you'll be due for an oil change.
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