GLENDALE — Car sales have gone cold following a hot streak that ended in March, when consumers rushed to make purchases before the April 1 sales tax hike.
Dealerships have reported a drop in business of as much as 25% since the statewide sales tax went up 1% at the start of the month.
The drop in sales came after an advertising blitz by retailers, stirring a shopping frenzy that filled stores and car dealerships late into the night March 31, dealers said.
Visitors filled Bob Smith Toyota and Scion in La Crescenta until 1 a.m. March 31, sales representative Ron Smith said. And shoppers repeatedly expressed concern about the tax hike at Lexus of Glendale, where some visitors were under the false impression, fueled by some advertisers, that the rate would jump by as high as 2%, Vice President and General Manager Johnny Harrison said.
“It stimulated a thought process about what you may or may not need to buy,” Harrison said of the aggressive advertising leading up to April 1.
That buildup may have persuaded buyers to make their purchases before the end of March, while also creating widespread awareness about a tax hike that seemed more substantial to customers than it really is, Harrison said.
“It’s a perception of a savings,” he said.
Used car sales have also dropped, said Zack Aghajanian, manager of Imax Auto Group in Burbank, which had experienced one of its best five periods in its 21-year history before its sales fell about 20% after the tax hike.
“Obviously, all of that one [percentage] point may not be sufficient [to win over some buyers], but it’s just within people’s minds that it is, and they just rushed and purchased cars,” Aghajanian said of sales before April 1.
The combination of the faltering economy and the lost urgency to make purchases before the tax increase has left dealerships everywhere with fewer customers this month, he said.
The steep decline in sales at area dealerships is indicative of the market’s sensitivity during the recession, said Don Nakamoto, labor market specialist for the Verdugo Workforce Investment Board.
“People are so cautious and so concerned about saving money wherever they can that they sense an opportunity to save some money and they’re motivated in certain situations to try and do that,” Nakamoto said.
Car dealerships will likely struggle more than other businesses to battle the gloom that has settled in after the tax jump, Harrison said.
“I don’t think that people aren’t buying today because of the 1%,” he said. “I think the hoopla and the push, push, push, push is gone, so it’s sort of that ‘back to usual’ because of the economy.”
