In an attempt to stay a step–and a few dollars–ahead of the Internal Revenue Service, consumers rushed to dealerships and bought 210,654 new cars in mid-December before changes in federal tax codes on Jan. 1 wiped out the sales tax deduction.
Dealers reported waves of buyers in showrooms as sales rose 28 percent over the 165,132 new cars sold a year earlier.
Industry analysts forecast sales results in the final 10 days of December, to be reported Wednesday along with full-year totals, will follow the same trend as midmonth.
”In fact, sales for the end of the month should be even better than in midmonth,” said Arvid Jouppi, an independent Detroit analyst.
”Sales reflect tax-advantage buying along with the fact Ford and Chrysler had 3.9 percent financing programs on selected small cars and GM was offer a $300 rebate on its Cavalier,” he said.
Though sales were strong in December, analysts warn a downturn is coming. ”I expect sales of 650,000 units for the full month of December, which compares with 558,000 a year ago,” Jouppi said, ”but in January I would expect sales to dip and fall below 600,000 units for the month.”
Wendy Beale, analyst with Smith Barney, Harris Upham & Co., agrees December was building up to a letdown.
”We suspect the tax buying as well as the 2.9 percent financing programs of last summer pulled 500,000 sales from 1987 into 1986,” she said.
”A recovery will come, probably in February and probably incentive-induced,” Jouppi said.
He said he expects consumers to wait out the market in January in anticipation of Detroit offering an incentive, which in turn would force the automakers into offering a special program. But rather than low-cost financing, he suggests Detroit will turn to ”dealer incentives” such as optional equipment free or at reduced prices to dealers so they can in turn pass the savings along to consumers.
Jouppi said he doesn`t think Detroit will resort to discount financing packages because as of Jan. 1, taxpayers who itemize can only write off 65 percent of the the interest charges on car loans.
In the mid-December period, General Motors Corp. sales were up 11 percent to 105,963 units from 95,049, Ford Motor Co. sales rose 65 percent to 62,558 units from 37,767 and Chrysler Corp. sales were up 23 percent to 28,591 from 23,216.
Honda Motor Corp. sales rose 107 percent to 7,302 units from 3,520 and Nissan Motor Manufacturing U.S.A. sales were up 50 percent to 2,732 from 1,815. American Motors Corp. sales fell 36 percent to 1,110 from 1,750 and Volkswagen Of America sales were off 27 percent to 1,465 from 2,015. Toyota Motor, which recently began selling U.S.-made cars built at its joint-venture plant with GM in Fremont, Calif., sold 933 cars in the period.
For 1986 to mid-December, the domestic automakers sold 7.94 million cars, down about 0.4 percent from the 7.97 million sold a year ago.
