Government shutdown hits D.C.-area car dealers especially hard
Washington — New-vehicle sales across the nation are expected to rise slightly in January, but the picture is different around Washington, D.C., where some car dealers say sales are off 10-20 percent due to the partial government shutdown.
As the shutdown approaches its second month and 800,000 federal workers miss another pay cycle, dealers are worried that customers will become even more cautious if the shutdown stretches on much longer.
Vince Sheehy, president and CEO of Sheehy Auto Stores, which operates 23 dealerships in the region between Baltimore and Richmond, said sales of new cars at his stores have been down about 10 percent since the government shutdown started in late December.
"The stories we hear about people living paycheck-to-paycheck, we see them every day in the course of doing business, coming up on their second missed pay-period...," he said. "It's certainly made customers very, very cautious, those that are caught in this, about spending a nickel they don't need to."
Sheehy's dealerships are offering furloughed federal workers the option of paying only half the amount of their service bills, and deferring the other half until after the government reopens. He said that's helped the service business at his dealerships stay consistent with the same period last year. Federal employees have been guaranteed back-pay, even if some federal contractors will be left in the cold.
John Altman, chief operating officer of the Beyer Auto Group, which operates eight dealerships in the northern Virginia suburbs of Washington, said sales at his dealerships are off 20 percent from where he expected them to be before the shutdown.
"The month started OK for us, but the last 10 days have been really challenging," he said. "This directly impacts so many other people, like contractors. The government touches everything here."
Altman said the service business at his dealership has been up for the month, which he attributed to the fact that his company is giving furloughed federal workers the option of deferring any payment on their bills for up to 30 days after the shutdown ends.
"We've had quite a few people take us up on that offer," he said. "We've got our fingers crossed that they come to an agreement. This is not the first government shutdown we've been through, but this is the longest one we've had."
Altman said the 20 percent drop in sales "is pretty big" for his dealerships. "If we don't make that up next week, it's going to a very, very rough January for us."
Analysts say December, January and February are typically slow sales months for automakers, compared to peak-demand months in the spring and summer. The website Edmunds.com predicts 1,169,804 new cars and trucks will be sold in the U.S. in January, which would represent a 1.3 percent increase from January 2018, despite furloughed federal workers, growing uncertainty about the economy, and a winter storm this week that stretched from Wyoming to the Great Lakes.
But car dealers around the nation's capital have not been spared by winter weather: A crippling snowstorm dumped 10 inches of snow on Washington last week.
John O'Donnell, president and CEO of the Washington Area New Automobile Dealers Association, said other members of his group have joined Sheehy and Altman's dealerships in offering discounts and financing options for maintenance work.
He said it's still too early to tell what the true effect is.
"On new-car sales, there's some softening," he said. "It's not overly drastic because when you think about the Washington, D.C., market and the number of workers affected, there's essential and non-essential (employees), so there are some workers who are receiving their checks."
And, he said, the impact varies brand-by-brand and county-by-county. Dealers of luxury cars — and those in more-affluent counties — are feeling less of a pinch.
O'Donnell said the Washington market is usually strong enough to withstand temporary government shutdowns. But, he acknowledged, "there might be a residual effect or hangover."
Michelle Krebs, senior analyst for Autotrader, said the region is important to the national sales picture.
"The Washington, D.C., metro area is a big one for car sales, ranking about 11th among metro areas in the U.S.," she said. "One of the critical drivers of vehicle sales is employment. When consumers feel they are secure in their jobs, they are more willing to take on a car loan."
She expects sales to be muted during the shutdown. "The question will be, will they bounce back?" she said. "For those whose credit remains intact, their purchases may be simply postponed.
"But depending on how long the shutdown lasts, federal workers may suffer some decline in their credit ratings at a time when we expect lenders will tighten credit due to higher subprime lending last year and an increase in defaults and delinquencies cropping up."