Car dealers find traction: Plummeting gas prices give customers a new incentive to visit Valley auto lots.

Oct 29, 2008 (The Fresno Bee - McClatchy-Tribune Information Services via COMTEX) -- VOLVY | Quote | Chart | News | PowerRating -- For the first time in about a year Tuesday, the average price of a gallon of gasoline in the Fresno area cracked the $3 barrier. That news is good for motorists -- and automobile dealers whose sales have languished in recent months.

"I watch these gas prices drop and just breathe a big sigh of relief," said Sean Wilson, general sales manager at Fresno Lincoln Mercury Volvo on North Blackstone Avenue. "People are starting to buy again."

On Tuesday, AAA said the average price for a gallon of regular unleaded fuel was about $2.95 in Fresno -- a drop of about 6 cents from the previous day, and more than 50 cents from just two weeks ago.

Auto dealers say renewed customer interest is not confined to gas-sipping subcompact cars or hybrids. Even sport utility vehicles appear to be gaining ground.

Bill Hedrick of Hedrick Chevrolet in Clovis said about 90% of sales in September were pickups, vans and SUVs.

Hedrick said many of his customers are small businesses that are driving their vehicles longer, wringing more miles before buying a replacement.

"We're seeing a pent-up demand," he said.

Wilson said that after a slow summer his Fresno dealership is seeing a boost in sales of its biggest model -- the beefy Lincoln Navigator.

"The Navigator is our top seller right now. We've sold five this month, compared to one or two the last few months," Wilson said. "And it's not just the SUV doing better, but all models."

Wilson credited falling fuel prices and factory incentives for the increase, but he predicted even more improvement to come.

"I think customers are waiting to see what happens in the election," he said. "Once we know who wins, I think things will settle out a little more."

However, industry analysts say economic fears are keeping overall car-buying enthusiasm in check, and a turnaround could take some time.

"People don't have money and it's harder to get credit, and they have other financial priorities right now," said Robyn Eckard, a spokeswoman for KBB.com, a Web site affiliated with the Kelley Blue Book. "What we're seeing is that lower gas prices are literally having zero effect right now."

Marketing research by Kelley Blue Book shows that 31% of prospective new-car buyers are delaying their purchase to a year from now, Eckard added.

Yet, Jessica Caldwell, manager of pricing and industry analysis for the automotive information Web site Edmunds.com, acknowledged that lower fuel prices are helping SUVs and other big vehicles regain sales traction.

She said that as housing prices took a nose dive earlier this year, "we saw a lot of ... people making purchase decisions based solely on miles per gallon."

But Caldwell said, "People had to get more realistic about their vehicle needs, and that coincides somewhat with gas prices coming down."

Edmunds.com expects sales of new cars in October to be at their lowest volume in the United States since January 2002. Sales of new cars and trucks in the state fell 19.1% in the third quarter, the California New Car Dealers Association said Monday.

Other analysts are watching the downward trend in gas prices closely.

"When gas went up over $3 a gallon, that's when consumers started cutting back on their gasoline usage," said Matt Skryja, Northern California spokesman for the AAA.

Recent figures from the U.S. Department of Transportation showed American motorists drove 5.6% less, or 15 billion fewer miles, in August 2008 compared with August 2007 -- the biggest single monthly decline since the data were first collected regularly in 1942.

"It's going to be interesting to see whether or not people revert back to old habits," Skryja said. "Analysts disagree, but it's possible the overall economic state of affairs may be enough for people to continue their conservation efforts."

Analysts for the automobile association believe prices nationally will move as low as $2.50 per gallon before Thanksgiving, Skryja said, and head even lower before the end of 2008. Tuesday's national average was $2.63, according to AAA.

Sub-$2.50-a-gallon gasoline is already a reality. But you have to know where to look.

The One Stop minimart on East Manning Avenue in Reedley sold regular unleaded for $2.42 a gallon Tuesday afternoon.

"Our customers are pretty happy," said Inder Singh, the shift manager at One Stop.

And because customers are getting more change back from their fill-ups, they have more money to spend on merchandise inside the store, Singh said, which provides a better profit margin than gasoline sales.

The reporter can be reached at tsheehan@fresnobee.com or (559)441-6319.

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