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Auto Sales Hit by the Dog Days of Summer

Car dealership
Car dealership

It would be nice if we could blame this on the weather.

Truth is we can't.

No, the dog days of summer in the auto industry are here for a variety of reasons that we expected, and a few that are lingering and frustrating many in the auto industry.

Let's start first with the lackluster sales we are seeing this summer. While we still have just over a week left in July, J.D. Power is reporting that this month's retail sales will be tepid at best. J.D. Power believes July retail sales pace will come in at 9.8 million vehicles. That would be a modest improvement over the June sales rate, but still below the pace the industry saw during the recovery late last year and earlier this year.

So what's keeping auto sales from taking off? Blame it on a host of factors ranging from inventories that are still tight for some models to a sluggish economy that has people putting off big purchases. Look at each one and you see why dealers are worried.

Low inventory levels

Yes, it's improving. Unfortunately for many dealers the supply of some Japanese models remains tight and as a result, some buyers are putting off buying a new car. This hangover from the devastating earthquake and tsunami in Japanearlier this year is working itself out and will be completely corrected by September.

Sluggish economy

This is the issue that worries auto dealers. As the US economy drags, so does the enthusiasm of potential new car buyers. And who can blame them? With the unemployment rate staying over 9 percent, and the forecast for job growth being weak, it's spooking many buyers into sitting tight instead of signing up for a monthly payment.

Lack of incentives

Remember the good old days when automakers could stir the pot by goosing incentives? Yeah, those days aren't coming back. The automakers are reluctant to raise incentives given the weak sales environment. It would be money spent with limited returns.

So will this continue into August? Yes. The inventory story is becoming less and less of a factor, but as long as the economy and jobs situation fails to improve, few dealers are expecting sales to improve substantially before September.

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