By Rachel Pleasant
Staff Writer

Thanks to all those employee pricing deals, the Lowcountry’s Chrysler, Ford and GM dealers have been flooded with customers and in turn, trade-ins.

In what car companies could dub the “summer of the employee discount,” Chrysler, Ford and GM each posted record-breaking sales for the months of June and July.

The Chrysler Group sold 240,146 vehicles in July, up 32% from a year ago. Similarly, Ford sold 366,548 autos in July, up 29% from 2004, and GM sold 588,092 cars and trucks in June, a 41% jump from a year ago.

Each of the companies credit their employee price deals—be it Ford’s “Family Plan,” GM’s “Employee Discount for Everyone” or Chrysler’s “Employee Pricing Plus”—with the sales gains.

Charleston area dealers have reveled in the success of these programs, as a record number of buyers drove vehicles off their lots. But as new cars were sold, used cars were traded.

The result of all that wheeling and dealing, local dealers said, is a glut of used cars.

At Palmetto Ford, located along Savannah Highway, owner and general manager Graham Eubank said his used car inventory is up significantly since Ford’s Family Plan began in July.

“We’ve gotten another 30 to 40 vehicles a month,” he said.

Typically, Eubank keeps his new-to-used car ratio at about 250 to 100. With the influx of trade-ins, that ratio is now about 200 to 150.

All the used cars Eubank has taken in during the past several weeks have forced him to rearrange his lot. He is carrying fewer new cars and using pavement usually designated for the latest models to store used vehicles.

Additionally, Eubank said, because he has so many used cars coming in from his customers, he has cut back on his trips to auction houses.

That came as a surprise to Keith Lelux, president of Charleston Auto Auction in Moncks Corner. Charleston Auto Auction works strictly with dealers, not the general public.

Lelux has seen no decline in sales through his auction, he said.

“Our volumes have not declined. Many times, even though trades are up, dealers are looking to dispose of them. They’re looking to turn that metal into cash,” Lelux said.

What Lelux is seeing a lot more of is a compression of used car prices as a result of the employee discount programs, much to the dismay of the sellers.

The compression in prices is especially troublesome to dealers who may have invested in used cars prior to the employee discounts, possibly paying top dollar for 2002 or 2003 models, only to see the 2005s sell for less, Lelux said.

Though employee pricing may be having the immediate side effect of compressing prices for used cars, Eubank suspects the promotions will go a long way in renewing interest in the used car market. Ford plans to discontinue its program Sept. 6, but Chrysler has said it will extend its employee pricing deal on the remainder of its 2005 inventory.

GM has also extended its discount through September and now applies it to most 2005 models.

“I’m going to predict that you’ll see the used car market come back a little,” Eubank said. “Used cars had fallen off in the past few months.”

Eubank will be placing a greater emphasis on advertising his used car inventory and expects many of his salespeople will transfer their focus to used cars as well, he said.

Eubank predicts his used-to-new car ratio will be back to normal by November.

“By then, we’ll be getting the ’06 models, and we be building up our inventories again,” he said.

Until then, consumers who are in the market for a used car could be in for a good deal.

Because there is an oversupply of used cars on Eubank’s lot, it is likely that he will drop prices. He said reductions would probably be something below 5%.

At Summerville’s McElveen Buick Pontiac GMC, general manager Todd Smith said because GM was the first company to introduce employee-pricing deals, his dealership has already come full circle in terms of dealing with its trade-ins.

As of late August, McElveen had about 250 vehicles on its Summerville lot, down from the typical 450.

Rachel Pleasant is a staff writer for the Business Journal. E-mail her at rpleasant@charlestonbusiness.com.

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