October wildfires drive up car sales in Sonoma County

Feb. 25--Almost a decade since the auto industry hit the skids during the Great Recession, car dealers have been cruising the last few years thanks to an improved economy and lower gas prices.

In fact, new car registrations in Sonoma County jumped 9 percent last year, putting 22,668 new cars on local roads, believed to be a new record, according to Experian, a credit reporting firm.

The sales spike was driven, in part, by calamity. Thousands of cars were damaged or destroyed in the October wildfires, forcing residents to buy replacements.

New car registrations rose sharply during the last three months of the year in Sonoma County: 2,297 in October, 2,038 in November and 2,398 in December, according to Experian. Those three months -- when fire victims would be most likely shopping for replacement vehicles -- represented 30 percent of the overall sales for last year.

"We're pleased we've been able to help 46 people replace cars they lost in the fires," said Tom Hubert, senior vice president of auto, insurance and wealth services at Redwood Credit Union, which operates a car lot in south Santa Rosa. Redwood had a 13 percent increase in car sales last year, about a quarter resulting from new cars.

The state Department of Insurance reported that 4,173 auto claims were filed as a result of the fires in Sonoma County, representing almost $70 million in insured losses. Carriers had paid out nearly $50 million to fire victims as of last month. Additionally, 502 auto claims were filed in Napa County, 167 in Mendocino County and 35 in Lake County from the wildfires.

Redwood Credit Union offered 230 auto loans for its members to buy replacement vehicles that were damaged or destroyed in the fires, said Ron Felder, Redwood's executive vice president. Redwood offered them a special 1.9 percent annual interest rate so they could afford to quickly get new wheels.

But the fires were not the only force driving up car sales.

New car registrations in Sonoma County have topped more than 20,000 annually over the past four years, according to Experian. That is a far cry from the 9,704 new vehicles registered in 2009 during the depths of the financial crisis, when the Big 3 automakers teetered near bankruptcy and General Motors Co. and Chrysler LLC required bailouts by the federal government.

"We've essentially doubled the number of cars sold from 2009 and we reached what I would call market stability," said Brian Maas, president of the California New Car Dealers Association. Despite a 2 percent decline in sales, auto dealers statewide still sold 2.05 million cars last year -- the fourth year in a row more than 2 million vehicles were sold in the Golden State.

Nationally, new car sales dropped 1.7 percent last year to 17.1 million vehicles.

Analysts said the primary reasons for the strong car market were a growing economy -- the gross domestic product grew 2.3 percent in 2017 -- and relatively stable gas prices.

"We track pretty much with the overall economy," Maas said. "Car sales are like the proverbial canary in the coal mine."

Average gas prices in California have not surpassed $4 a gallon since the summer of 2014. Buyer enthusiasm has not slowed, even with a 12 cent per gallon tax increase that went into effect Nov. 1. Notably, sales of new light trucks in California surpassed cars in 2017, accounting for 51 percent of the market. Trucks and sport-utility vehicles typically decline the most when gas prices are high because of their lower fuel efficiency.

Most people are willing to accept gas prices between $3 and $3.50 per gallon, Mass said. "You start to see change when it gets above $4," he said.

Overall, Sonoma County tends to sell more trucks than the state average and that was the case again last year, said Justin Hansel, vice president and general manager of Hansel Auto Group, which operates eight locations in the county with brands including BMW, Acura, Volkswagen, Subaru, Lincoln, Mazda, Honda, Toyota and Ford.

The popularity of trucks in Sonoma County is a reflection of the area's agricultural tradition. Nationally, the light truck market is 64 percent of new sales, according to IHS Markit data firm.

"The new (Ford) F-Series have really taken off," Hansel said. "It's a lighter truck that gets you much better fuel economy, but it won't sacrifice truckload and towing."

Hansel agreed that 2017 was good year for local dealers, though data he reviewed that represents about 60 percent of the new car market in Sonoma County showed a 1.5 percent increase in sales last year. He noted there could be discrepancies from the registration data, resulting from delay in logging new registrations and the impact of purchases made by customers residing outside Sonoma County.

"It wasn't our best year ever," he said of 2017. "But it was up there with one of the best."

Another bright spot was electric vehicles, which represented about 2 percent of Hansel sales. Statewide, electric vehicles accounted for 2.7 percent of sales in 2017, double the amount from four years earlier. Hansel offered such selections such as the $51,093 BMW i3, the $29,210 Ford Focus EV, and the Volkswagen e-Golf at $28,995.

Incentives are essentially the key to the market and buyers dry up without them, Hansel said. Sonoma Clean Power offered a $2,000 subsidy to its home consumers, helping to draw in more shoppers when combined with other state and federal incentives. For example, the price for the e-Golf was as low as $9,995 for a customer who qualified for all of the rebates.

"When there is extra incentives in all the electric vehicles, we do see movement," Hansel said. "It's when the stars align."

Better financing has also helped boost car sales. Lenders have relaxed some of their credit criteria from some years ago to make it easier to place customers into loans, one local car dealer said privately.

Felder said the auto lending market remains competitive. Redwood Credit Union has aggressively reached out to local dealers to ensure that it can offer a "very quick" decision on whether a borrower -- including non-members -- can qualify for a loan at the dealership, he said. It also works to pre-approve members before they enter the showroom to make the transactions seamless.

"We want to be consistent that they know when they go to Redwood they can get a (loan) decision and quickly get paid," Felder said of auto dealers.

The Santa Rosa credit union increased its auto lending 40 percent, issuing more than $300 million in car loans.

The new car market is predicted to be strong again in 2018, though declining slightly in California to 2.01 million sales, according to the Auto Outlook forecasting firm. But there could be a slowing in the future as a result of a stronger used car market, said Bernard Swiecki, director of automotive communities partnership for the Center for Automotive Research in Ann Arbor, Michigan.

Approximately one-third of new car sales involve a lease and those cars are now again showing back up in lots after the terms have expired, Swiecki said. Those newer models, offered at significantly lower prices than brand new cars, could slow down sales of new cars in future years.

"We have a flood of used cars now," he said. "If you want to buy now, there is supply out there."

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.

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