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Luxury auto dealerships avoiding highs and lows thus far

A report issued earlier this month shows that even the wealthiest among us are feeling the squeeze from the economy.

USA Today tallied luxury car sales from August and the numbers showed that the business of fine automobiles experienced a 13% drop from the same period in 2008.

It is another in a long line of once-reliable market indicators that have slipped.

“And it might not be because people who could afford a luxury car before can’t anymore,” Paul Moak, who owns dealerships that sell Volvos, Subarus, Hondas and General Motors vehicles in Jackson and Ridgeland. “A lot of people are skittish right now.”

Moak said sales of his luxury lines, like the larger Volvo sedans, have not suffered dramatically. The past month has seen the most acute fall in sales.

“And that’s probably true for every auto manufacturer,” Moak said.

But the need for a vehicle is not going to go away, regardless of economic climate. People, especially in states like Mississippi with large rural areas, have to get to and from a job.

“The American public is a group that tends to move when they want to move,” Moak said. “So we have to be prepared when opportunities arise.”

The biggest change at his dealerships, Moak says, is the costumer who is switching from a large vehicle that gets poor gas mileage to a smaller one with better fuel economy.

“Interest has certainly grown in cars that get good gas mileage,” he said. “But that doesn’t mean a vehicle like that will necessarily fit their needs. Some people have to have a truck for their job.

“In the end, everybody has to make a rational decision. Look at the carpool lines at schools. Years ago everybody had the big station wagons, then it was the full-sized vans, then the minivans and finally you had the SUVs. It got to a point where the past few years everybody had to have an SUV because everybody else did. And a lot of people made bad choices, over-extended themselves. Just because you want a luxury car or an SUV doesn’t mean you can afford one.”

Now that gas prices have risen, dealerships are selling smaller cars faster than they are large trucks and SUVs.

“That’s the biggest change,” Moak said. “And that has allowed some other people to gain some market share, like Honda and Subaru.”

At Higginbotham Mercedes-Benz-Porsche in Jackson, the inventory consists of the blue-bloods of luxury cars.

“We’re staying steady,” said Higginbotham general manager Edwin Vickery. “We really haven’t seen a huge spike or a huge fall.”

One reason for that, Vickery said, is Mercedes is one of the few auto manufacturers left who rely heavily on leases. Because the monthly payment on a lease is significantly less than that of a purchase, that part of Higginbotham’s business has stayed strong.

“And besides that, if I’m going to spend thirty our forty thousand dollars on a car, I’m going to step up and get a Mercedes, because I can look at the resale value and know that I can keep it for eight or ten years and still have something left in it,” Vickery said, adding that because Mercedes-Benz does not produce as many vehicles as most other manufacturers, it isn’t stuck with a large volume of inventory at its dealerships that it cannot sell.

Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .


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