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Coronavirus has Florida car dealers bracing for fallout

Selling cars is big business. Any slowdown will have a ripple effect.
Coronavirus is expected to cut into car and truck sales in Florida and across the country.
Coronavirus is expected to cut into car and truck sales in Florida and across the country. [ DAVID ZALUBOWSKI | AP ]
Published Mar. 19, 2020|Updated Mar. 19, 2020

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Buying a car requires measuring what we want against what we can afford. We check our personal finances and run some numbers. But the decision to make such an expensive purchase is often more visceral: Does it feel right?

Coronavirus complicates the answer.

The worst of the crisis could be over in a few weeks or linger for months. Maybe the job losses won’t be so bad. Maybe everything starts getting back to normal by the summer. Or maybe not. The fallout could cut deeper into the economy, leaving permanent scars.

Tom Castriota understands the anxiety. He has sold cars and trucks since 1979 and opened Castriota Chevrolet in Pasco County in 1993. His business survived 20 percent interest rates in the early 1980s and double-digit unemployment during the Great Recession.

In the past week, he’s noticed some changes in buying habits. He’s selling fewer new cars, but quality used vehicles are flying off the lot. His service department has seen a significant uptick in business, as people working from home or taking days off have time to bring in their cars and trucks.

He remains optimistic.

“My gut tells me that after 60 days or so, we see a return to normal,” he said from his dealership on U.S. 19 in Hudson. “We don’t have 10 percent unemployment. The economy was in good shape going into this.”

Vincent Nanfra was similarly upbeat. The general manager at C&C Cars in Pinellas Park said his used car lot was having a “very good month.” He has seen a drop in foot traffic, but the people coming in were buying, not just looking.

In most years, C&C would be busy for the next few weeks as people get their tax refunds, he said.

“If coronavirus hits hard, I think it will be like the hurricane a few years ago,” Nanfra said, referring to Hurricane Irma which swept through the Tampa Bay area in September 2017. “Sales tanked for a few weeks, but went ballistic a month later.”

Car dealers are a hopeful group. They often have millions of dollars — if not tens of millions — in vehicles sitting on their lots that need to be sold. It helps to think of the glass as half full, even when there are signs that sales could erode.

Jason Kuhn, who owns two local Volkswagen dealerships, thinks dealers could be in for a rough ride. He managed not to take on too much debt over the past few years but said many dealers are highly leveraged right now. That’s fine when the economy is solid, he said, but can be “cataclysmic during times like these."

Kuhn said he isn’t trying to scare people but wants to be realistic about what could happen. He already laid off employees and expects sales to fall further.

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“When people are fearful of getting really sick, fearful of losing their jobs, fearful of losing their wealth, fearful of food shortages, the last thing they will do is buy a new car,” he said. “When we finally come out of this, the consumer will have such PTSD that spending habits will be changed for years to come. I hope I’m wrong. I really do.”

In China, auto sales plunged 79 percent as the virus took hold in February. Automakers shuttered plants in Asia, though some have reopened. Earlier this week, Fiat Chrysler said it would close most of its plants in Europe. In Italy, the Lamborghini plant is closed until later this month. Ferrari also closed its plant.

Ford, General Motors and Fiat Chrysler all announced they would close U.S. plants until at least March 30.
Ford, General Motors and Fiat Chrysler all announced they would close U.S. plants until at least March 30. [ Associated Press ]

On Wednesday, Ford, General Motors and Fiat Chrysler announced they would close plants in the United States, Canada and Mexico until at least March 30. Unions had pressed the companies to close to help protect workers and keep the virus from spreading. Toyota, Nissan and Honda also said they would idle plants in North America.

Stock prices for the major U.S. automakers have plummeted by more than 40 percent in the past month, a much larger drop than the S&P 500.

RBC Capital Markets recently forecast a 20 percent decline in U.S. sales this year thanks to coronavirus. Instead of up to 17 million new vehicle sales, the estimates call for closer to 13.5 million.

A slowdown in auto sales will ripple across Florida’s economy. The state’s 870 new car dealerships make about $80 billion in sales a year, according to the Florida Automobile Dealers Association. They employ 82,000 people who earn an average of $60,307 a year. New vehicle sales account for nearly $4 billion in state sales tax. That’s more than 14 percent of the total the state collects each year.

Ted Smith, the association's president, said car dealers are an essential service that should be allowed to remain open. Floridians need transportation options now more than ever, he said.

“With coronavirus, they’re not going to want to get on buses or ride in an Uber or get in a cab,” he said. “They’re going to want to have their own vehicle where they feel safe.”

To attract buyers, Ford has offered customers the option of delaying their first payment for 90 days. GM is pushing zero-percent financing for seven years for customers with good credit. The company also has a program that allows buyers to put off their first payment for four months.

Joe Jackman, a retail expert and author of The Reinventionist Mindset, said dealers will have to pivot to online engagement, including customer outreach, negotiations, service support and relationship building. He recommended that dealers take the long view.

“Now is the time to build relationships and brand goodwill so you will come out of the gate stronger (when the crisis passes),” he said. “Customers remember who was in their corner in tough times.”

Castriota said he’s pushing internet sales and a demo program in which dealership employees bring cars to customers’ homes to test drive. In the service department, technicians are cleaning key fobs and wiping down steering wheels and other parts inside vehicles. There’s lots of hand sanitizer around and everyone is keeping a safe distance from each other, he said.

“We’ve been here a long time,” he said. “We will get through this.”

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