Memorial Day deals expected to lure car buyers
This is the weekend Mike Halloran has been waiting for.
"We're very optimistic," the sales director at Fletcher Jones Auto Group said from the firm's Mercedes-Benz (XETRA: DAI-DE) showroom in Chicago on Friday. "Saturday we anticipate good traffic and probably even more customers coming through on Monday."
The combination of a fairly healthy economy, low interest rates, moderate gas prices and strong consumer sentiment are setting the scene for the weekend to post a dramatic surge in auto sales. While a sales boost is to be somewhat expected, as Memorial Day weekend is traditionally one of the year's best for auto dealers, a new forecast by J.D. Power predicts 2015 could be even better.
The auto consulting firm is calling for a May sales pace of 17.3 million vehicles, which would result in a roughly 4 percent increase compared with sales in the same month last year. More importantly, daily retail sales at dealerships are expected to top 50,000 vehicles for the month, which would be an 11-year high, according to the firm.
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"Obviously, there is still some pent-up demand with the average vehicle being 11 or 12 years old and that is one reason this May is stronger than in recent years," said John Humphrey, a senior vice president at J.D. Power.
Although that data point indicates many Americans are ready to buy a new car, truck or SUV, the fierce competition to get potential customers into their showrooms is driving many dealers to push offers to rarely seen levels. Edmunds.com estimates that one out of every three new models is being offered with zero percent financing.
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While that sounds like a sweet deal, just 7 percent of those who finance a new vehicle qualify and take advantage of the offer, according to Edmunds senior analyst Jessica Caldwell. But that doesn't prevent people from being lured into the showroom.
"Even though the reality is most people won't get or take zero percent because the interest rate may come for loans with three-year terms, zero percent still gets people's attention," she said.
Many of the models being offered with no-interest loans are sedans and small cars, which are not as popular this year (sales in this segment are down 7.1 percent year-to-date, according to Autodata). Yet there are some small crossover utility vehicles and small SUVs, whose sales are up 13 percent this year, that are being offered with zero percent interest rates.
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For auto business veterans like Halloran, all of the ingredients are in place for a big weekend.
"One thing that will stand out this weekend are 'happy, happy customers' who are not coming in dreading that they have to buy a car," he said. "People are looking forward to buying because they know dealers will have to work harder to exceed their expectations and get their business."
Questions? Comments? BehindTheWheel@cnbc.com .
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