President Barack Obama wants to know what he has to do to put more Americans in a new car.
The answer? Probably more than warranty backstops.
On Monday, car dealers welcomed Obama’s reassurance that the government would back up new car warranties even if manufacturers can’t. But warranty security is far down on the list of concerns facing new car buyers.
Inconsistent financing because of the credit crisis and a lack of consumer confidence in the economy are bigger problems.
"Surprisingly, we haven’t seen that many consumers who seem concerned about it," said Tyler Corder, chief financial officer of Findlay Automotive Group. "Whether it is an issue of some of the people who don’t come in and aren’t coming in, I just don’t know that."
Henderson-based Findlay owns 21 dealerships covering 16 brands in Nevada, Arizona, Utah and Idaho.
The warranty backstop Obama mentioned would only go into action if the carmaker that issued the warranty went out of business, something Obama was "absolutely committed" to preventing.
In addition to the warranty backstop, Obama said stimulus legislation he recently signed would make sales and excise taxes on new cars tax deductible.
That will have little effect in Nevada because the Silver State has no state income tax, which means many Nevadans already deduct sales tax on their federal returns.
Nevada Sens. Harry Reid and John Ensign have introduced legislation to make the deduction permanent, said Reid spokesman Jon Summers.
Corder says the government could motivate more buyers if it made interest on car loans tax deductible.
"That would mean some real dollars to a consumer," he said.
Three dealerships contacted Monday said credit availability has increased since late 2008 and earlier this year when financing was close to nonexistent.
But dealerships are still turning away some customers who would have been financed a year ago. And some customers who do qualify are unsatisfied with the terms they’re getting.
Statewide car sales fell 30.2 percent in January, according to the Nevada Department of taxation. Since then, car dealerships say sales recovered in February and March as the credit markets started to thaw. But consumers still need more encouragement.
Bob Dziak, sales manager of Chapman Chrysler-Jeep, says the frustrating part is lack of a clear message from banks over who will and won’t qualify for a loan, and how much it will cost.
"Today there is no consistency with the banks," he said. "One deal doesn’t necessarily copy the next."
Although there are fewer people on the lots these days, Dziak says a higher percentage are qualified buyers.
"We are getting the good credit customer," he said.
Even more striking, he says, the percentage of customers paying cash is as high as 30 percent to 35 percent.
Peter Reele, general sales manager of Henderson Chevrolet says credit market stability and higher consumer confidence would be a big boost.
"The warranty was never really a big issue with us," Reele said. "We can’t get enough people financed."
Reele says 80 percent of buyers finance the vehicle, and most of them are affected by the credit crunch.
"If we can’t get them financing, they are not going to buy. If they don’t like the terms they are not going to buy," he said. "Even if you are a 750 or an 800 (credit score), the bank looks at your entire profile."
Reele says it makes sense that banks are pulling back in some cases. But for the most part, he says, the pendulum has swung too far.
"It needed to tighten up, it was too easy," he said of consumer credit for cars, houses and other purchases that have burdened the economy with debt. "Credit worthy people should be getting car loans."
Dealerships mentioned some other ideas the government could do to help the automotive industry.
"Cash for clunkers" bills by Sen. Dianne Feinstein, D-Calif., and Rep. Betty Sutton, D-Ohio, would offer tax incentives for people to trade in old, gas guzzling vehicles for new, fuel efficient cars.
Another proposal by Sen. Barbara Mikulski, D-Md., would have made interest on new car and truck loans tax deductible.
Mikulski’s proposal was pruned back in the legislative process to apply to sales and excise tax deductions Obama mentioned, not interest on loans that would have saved more for consumers.
"It’s going to take a whole lot more than that," Jesse Toprak, a sales analyst with Edmunds.com, told CNN Money. "We’re talking about thousands of dollars to get people motivated at this point."
Contact reporter Benjamin Spillman at firstname.lastname@example.org or 702-477-3861.