Car Sales in the Fast Lane

Getting your regional bank to approve a car loan is no longer an uphill task. 

Flushed with deposits, community banks in the first quarter of this year adopted a less risk-averse strategy, advancing loans they would have declined even a year ago. This, coupled with attractive interest rates on car loans, is bringing much needed relief to long-suffering car dealerships in north central Connecticut, who are finally starting to see accelerating sales.

NewAlliance Bank, now First Niagara, offers auto loans at 5.9 percent for 2011-2012, down from 6.9 percent in 2009-2010 and 7.9 percent between 2006 and 2008.

At Rockville Bank, rates dropped from 7.2 percent in 2006-2007 to 5.8 percent currently.

“Business has picked up. Sales is up by nearly 15 percent since last year,” Steve Carter of Mazda of Manchester said.

“Our new car sales has increased by around 30 percent compared to the same period last year,” said David Hughes, a resident of Manchester who is a lease portfolio manager at Gengras Volvo in East Hartford.

He attributes the increase to historically low interest rates, better credit availability and a revival in consumer confidence. In conjunction with partner banks, Volvo offers financing for some models at interest rates starting as low as 1.9 percent for 72 months.

“People are coming out more to shop for cars. The traffic into our dealership alone indicates that this trend will continue through the rest of year. I think the worst effects of the recession is over,” he said.

Last February, Scranton Motors, Inc., a GMC dealership in Vernon, sold 42 cars. This February that number rose to more than 100.

“There’s a huge difference in credit availability. Leasing was pretty much non-existent in the last three years. The fact that we can get people with average credit approved for car loans is a huge change from last year,” Matt Scranton, sales manager, said. “It was tough, a lot of our competitors in the 20 mile radius are not around anymore.” 

Scranton offered an example to illustrate what a Herculean task it was for potential customers to obtain auto loans in the recent past. One of his customers who owned a $60,000 GMC Denali and had fully paid it off was unable to trade-in the vehicle for a cheaper car. 

“The bank turned her down even though the monthly payment for the new car would be $300 compared to the $600 she was paying at the time. These were the kind of things that were killing us,” he said.

Tom Godbout, general sales manager at Key Hyundai in Vernon, said since February of this year, the dealership has sold around 175 cars.

“Sales is up by around 50 percent from the same period last year. In the last eight weeks we’ve increased our staff from six to 12,” he said. “That’s our best sales since the recession and since the Cash for Clunkers program (a federal stimulus bill enacted in June 2009 to promote car sales).”

Godbout said dealerships that have maintained a good relationship with banks are able to now secure loans for more consumers.

“Banks are lending to even those who have sub-prime credit, unlike in the past,” he said.

On the flip side, an increase in demand has led to order backlogs and fewer promotional deals.

“Customers will now have to wait for two to four weeks to get the new Elantra, for example,” he pointed out.

Salespeople said they are seeing an increase in the number of people who walk into their dealerships.

This Sunday, Douglas Howard of Bloomfield bought a Cadillac from Scranton Motors in Vernon.

“We needed a new car and I thought, why not a Cadi?” he said.

His wife added, “We drive a lot and this car is on its way to Florida.”