Buy a Truck After Big TV as Dealers Embrace Black Friday: Cars – Bloomberg
The Jacky Jones Lincoln dealership had a message for Black Friday shoppers: After picking up that big-screen TV, stop by and lease an MKZ for $299 a month.
“We have better deals than normal,” said John Greene, general manager at the store in Gainesville, Georgia. “Car manufacturers are just like everyone else. They want to sell as much product as they can during the holidays.”
Black Friday, once associated with big-box retailers and shopping malls, has become a critically important day on the automotive sales calendar. Heavy discounting can undermine profit, whether you’re General Motors Co. (GM) or Wal-Mart Stores Inc. Given robust demand for automobiles and rising prices, the deals are unlikely to hurt automaker’s margins, analysts say. Even so, they might pull sales forward from December.
“Five years ago, Black Friday was not even in our category,” John Felice, Ford Motor Co. (F)’s U.S. sales chief, said in an interview. “Now it’s like the last week after Christmas, which accounts for half of industry sales in December.”
Automakers are dialing up deals to get a piece of the holiday. Volkswagen is offering zero-percent financing for 60-month loans on its Passat sedan; GM’s Cadillac luxury line is offering a $299-a-month lease deal on the ATS sedan. and Ford is giving $3,000 cash back on the Fusion sedan, according to researcher KBB.com.
“Black Friday represents one of the hottest shopping days in America, and new-car shopping is no exception,” said Jack Nerad, an analyst for KBB.com, based in Irvine, California. “There are amazing deals on new cars right now as the calendar year comes to a close.”
U.S. consumers emboldened by holiday deals, cheap gasoline and growing confidence probably boosted U.S. auto sales in November to a seasonally adjusted annualized rate of 16.8 million, the average of 13 analysts surveyed by Bloomberg. That would top the 16.3 million pace of a year earlier and October’s 16.5 million rate. Attitudes about buying vehicles are the most favorable since 2005, according to the Thomson Reuters/University of Michigan Surveys of Consumers.
“What was traditionally a December focus has now become a 60-day close,” Jeff Bracken, U.S. general manager for Toyota Motor Corp. (7203)’s Lexus, said to reporters in Detroit on Nov. 24 after a speech at the Automotive Press Association. “I don’t know how much further we can move back into the year.”
Jacky Jones Lincoln has been preparing for the holidays for weeks. The showroom windows have been painted over with candy canes and snowflakes. An 8-foot Christmas tree in the showroom has been trimmed with lights and ornaments. And the dealership has blanketed the airwaves and Internet with ads promoting Black Friday deals and holiday specials.
“This is our season,” said J.T. Hartman, a sales manager at Jacky Jones. “It’s pandemonium.” As of 5 p.m. on Black Friday, Hartman said he was “overwhelmed” at the response and couldn’t immediately provide sales details.
Reached by phone today, he said the dealership had sold about 13 vehicles in the two-day period after Thanksgiving and was still working on another six possible transactions. That tally represents an increase of about 15 percent compared with a typical weekend, Greene, the general manager, said.
While unable to quantify the number of visitors to the showroom, Hartman said it was busy enough that an off-duty police officer was required to direct traffic to the store and a ticketing system was necessary to organize prospective buyers.
The auto industry got on the Black Friday bandwagon about two years ago, led by luxury brands. This year, the deals began as much as 10 days before Black Friday, and the “epic selling season” will continue through December, said John Krafcik, president of auto-buying website TrueCar Inc. (TRUE) Lexus’s “December to Remember” ads started Nov. 24 and the holiday season discounts began in early November, Bracken said.
November sales results, scheduled for release tomorrow, may show a 2.5 percent rise to about 1.28 million light vehicles, according to the average of nine estimates by analysts surveyed by Bloomberg.
Fiat Chrysler Automobiles NV (FCA), which began trading Oct. 13 on the New York Stock Exchange, is projected to lead the way with a 16 percent increase, trailed by Honda Motor Co. (7267) at 4.3 percent, Volkswagen AG at 4.1 percent and GM at 2.6 percent, according to the survey. Ford is predicted to slip 2 percent.
Falling prices at the pump are helping increasingly confident Americans justify buying more expensive sport-utility vehicles, crossover-utility vehicles or trucks. A gallon of regular fuel fell to $2.79 as of Nov. 27, according to motoring club AAA.
“Now is a good time to buy a car and confidence is high,” said Jessica Caldwell, a senior analyst at Edmunds.com. “In the past, a television might have been the largest purchase. But now we’re seeing that it could be a big weekend for car sales, too.”
Confidence is buoyed in part by the availability of jobs. The jobless rate dropped in October to 5.8 percent, the lowest level since July 2008, two months before Lehman Brothers collapsed and took the global economy with it.
Even with all the deals, automakers aren’t falling back into old habits of giving away profits in favor of boosting sales, said Michelle Krebs, an analyst with researcher AutoTrader.com. Industrywide incentives remain well below historic highs and the average price consumers are paying for new vehicles is actually rising, she said.
“We are not back to the bad old days just yet,” Krebs said. “Holiday promotions make a lot of noise, but they are not necessarily the deepest discounts.”
There is one downside, however, to unwrapping automotive gifts this early, Caldwell said. If Black Friday sales are boffo, “it will probably steal a bit from December,” she said.
(A previous version of this story corrected the average estimates for GM and Ford.)
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