Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-02-04
USED CAR PROBLEM
BELIEVED SOLVED
Dealers Handling Only Those
They Can Readily Sell.
In New Trend.
BY j. G.. ROYLE.
Special Dispatch TO The Star

special Llnpdteh W 1ht CNA.
DETROIT, February 1.-The used
car bugaboo does not scare motor
car manufacturers any more. The
manufacturers say dealers have
learned more about selling cars in
the last two years than ever before
Dealers realize that just two things
enable them to do business and TO buy
new cars. One is cash and the other
is credit. If they get themselves
sewed up with used cars, both cash
and credit are soon lost. Consequently
they are handling only cars which
they can readily liquidate.
A number of makers, Dodge Broth
ers among them, have a force o
travelling auditors who circulate
among dealers and correct tendencies
toward danger of this sort. The used
car situation, at least in Detroit, bears
out the above statements. Dealers in
some cases are advertising for usec
cars. Signs read: "You have the car;
we have the cash. Bring it in.''
Won't Overcrowd Dealers.
President Strong of the Buick Motor
Car Co. told the writer in 1925 that
never again would that concern over
crowd its dealers with cars that they
could not move. Today other officials
Of General Motors confirmed the con
tinuance of this policy.
Dealers maintain that large num-
Der of people in this country have be
come sufficiently educated in the driv-
ing and care of cars SO that they no
longer are likely to be fooled as to a
used cars value, even if the dealer
tries to deceive them. These prospect
i've purchasers in many cases would
rather buy a used car of a medium or
high price range from a reputable
dealer than to buy a cheap new car.
Increase in population has been a
I decided factor. Many families have
grown so that it is no longer possible
TO put the family into a small car. If
the head of the family cannot afford
a new seven-passenger bus, he buys
used one.
Factory Costs Cut.
Sales and distributing expenses will
play a larger part than ever in de-
termining the profits of motor car
companies in 1927. Factory costs have
been cut almost as far as equipment
and methods devised at present viii
allow. Competition is exceptionally
severe. Cuts, therefore, must come
in distribution and sales effort and in
overhead. Some very expensive Office
suites promise to become vacant and
some very high-priced executives may
find themselves without jobs.
The strain, according to statis-
Z ticians here, will come not so much
on the small, quality producer. who
has built up clientele and whose
output is limited, as upon those COM
panieS which depend on volume pro-
duction for profits. One such COM
pany, for example, sold $4,000 cars
In 1925 as against 100000 in 1925, yet
these sales yielded almost the same
profit.
Turn Toward Advertising.
The first turn the more far sighted
manufacturers made was toward adj
vertising. In the early part of 1926,
when one concern found itself facing
desperate competition in its price
field, it was vigorously debated
whether the price should be cut to
stimulate sales. 1t was finally de-
cided to stress advertising. This
cost the company approximately SIS
q car for each car sold, but it not
only was able to sell without a price
cut the accumulated cars ALREADY
built, but 1t built up sales n1omen-
tum which still continues. When some
concerns, even among the big COM
panies, have to produce at least 200,-
600 cars year to make a profit at
all, it can readily be seen what such
sales momentum means.
In the writer's opinion, there are
four companies which stand out as
likely to make profits in 1927 COM
parable to those of 1926. Three
others may do as well as in the past
year. but with the chances against
them. Still others among the small
er producers may do even better. The
industry has plenty of cash and is
in splendid condition financially. The
strain will come on those who are
not properly organized.