Thursday, October 9, 2008

U.S. military boosts car sales in Europe

By Matt Millham, Stars and Stripes
European edition, Friday, October 10, 2008

Matt Millham / S&S
Car salesmen at Exchange New Car Sales at the Vogelweh shopping center in the Kaiserslautern military community wait for customers on a chilly October morning. Fewer customers purchased cars through the Exchange New Car Sales program this September than last, but sales are still doing better this year than last.
Purchase reprint

Americans working for the U.S. military in Europe bought more new cars in September than they did a year ago, despite growing U.S. economic turmoil.

But the overseas military car market as a whole — including sales from downrange and Pacific theater dealers — fared slightly worse this past September than the previous September, according to data from Exchange New Car Sales, an on-base car dealer associated with the Army and Air Force Exchange Service.

Still, overseas dealers that sell to the military are faring far better than their counterparts in the United States.

A freeze in credit to risky borrowers stateside, along with plunging home prices, climbing unemployment and worries about a possible recession, sent U.S. auto sales for the month of September down 27 percent compared to the same month in 2007, according to preliminary data released Oct. 1 by Autodata, an auto industry research firm.

For the year, U.S. car sales are down 13 percent, according to Autodata, and the National Automobile Dealers Association expects total sales of about 14.2 million vehicles this year, compared with 16.1 million in 2007.

Meanwhile, Exchange New Car Sales dealerships in Europe delivered 55 more vehicles this September than last — an increase of about 16.2 percent. But taking into account all other overseas locations, the company delivered 33 fewer vehicles for the month, a drop of about 3.7 percent.

That drop-off notwithstanding, Exchange New Car Sales has sold more new vehicles so far this year than last.

In the first nine months of 2008, the company delivered 8,803 new vehicles, compared with 8,796 over the same period in 2007. In 2006, it delivered 8,814 in the first nine months of the year.

Salespeople in Europe say the data shows the sort of bubble in which the military economy operates.

"The military really is recession-proof," said Peter Hughes, relations manager for Exchange New Car Sales at Vogelweh shopping center in Kaiserslautern.

Matched up against their civilian counterparts, who face the threat of unemployment on top of losses on the value of their homes and retirement savings, military members are seen by auto financiers as stable. Lenders remain willing to loan cash to troops, usually at rates lower than those offered to people with similar credit histories through stateside banks and credit unions.

At Community Bank, for example, car loan rates start at an annual percentage rate of 4.08 percent, while stateside rates through Bank of America, which runs Community Bank, start at a heftier 6.24 percent.

Troops "still get paid," even if the economy goes sour, Hughes said, adding that the tax-free allowances given troops for housing, food and uniforms all but cover many basic needs, and leave troops with a reliable stream of cash to spend on less-than-essential items.

This stability and constant cash flow are benefiting off-base dealers that sell to the military as well.

"We haven’t seen a drop either," said Chris Cadotte, a senior sales consultant for Pentagon Car Sales in Heidelberg, a BMW and Mini automobile dealer. For the year, in fact, sales are up compared to last year — thanks in at least part to a shift to smaller vehicles.

"Minis are definitely off the chart," he said.

At the same time, sales of big trucks and sport utility vehicles are down.

"You can’t give ’em away," Jeremy Howard, a salesman at Exchange New Car Sales at Vogelweh, said.

To move inventories of large vehicles, manufacturers have slashed prices on some models by more than $10,000 and offered incentives such as $1.99 gas, Hughes said.

Sales of the smaller Ford Focus and Dodge Caliber have, at the same time, taken off, according to Howard and other salespeople.

"What you will find with the credit crunch is people themselves will think about it (what they can afford) instead of the banks thinking about it for them," Howard said. "People are still going to need cars. If they need cars, they’re going to come see us.

"It’s not if they want a car," he said. "It’s if they need a car."

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