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Economic downturn fuels used-car sales, service business

If there is any good news for the auto industry after the Sept. 11 terrorist attacks, it is that lower new-vehicle sales could boost dealers' used-car sales as well as their parts and service business.

Analysts say consumers are more likely to buy used cars and trucks instead of new vehicles or keep their vehicles longer, generating more demand for service and parts. In addition, the airplane hijackings could motivate some people to drive rather than take to the skies, creating a need for more maintenance and repairs.

"We expect that the wait to get through airport security, along with fewer flights, will cause some people to decide to drive on vacations, and corporate restrictions on air travel will also increase the amount of driving," said Paul Taylor, chief economist for the National Automobile Dealers Association.

"Until the airlines regain full schedules, a lot of additional miles will be added to rental cars, corporate cars and private light vehicles. And they will require more service and parts," he said.

The economic slowdown already has channeled more business into the used-car and parts and service departments, Taylor said.

Through July, the last month for which figures are available, parts and service contributed 11.7 percent to dealers' total sales compared with 10.9 percent for the same period last year.

Used-vehicle sales contributed 29.7 percent through July compared with 28.9 percent last year.

Meanwhile, new-vehicle sales were running 4.9 percent behind last year's sales through August, he said.

Even before the terrorist strikes and economic downturn, experts were predicting growth in the fixed operations department. According to Frost and Sullivan, a New York City consulting company, the market for automotive maintenance work in North America is expected to grow 6 percent to $29 billion in 2007 from $27.3 billion last year.

The Motor & Equipment Manufacturers Association also forecast higher aftermarket parts sales. Those sales were $136.6 billion last year. The organization is expecting sales to hit $155.1 billion in 2003.

Whether car sales are strong or weak, "doesn't make any difference," said Frank Hampshire, director of research for the Motor & Equipment Manufacturers Association, explaining that people always will need to service their cars.

Said Hampshire: "The aftermarket parts business is pretty isolated from world events."

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