A lot was changing for car dealerships in the Washington area even before gas prices started their meteoric rise in the past year.
In the 1970s, for example, before thousand-dollar discounts and online price quotes, people would walk into John Darvish's car dealership and pay close to the sticker price. Today, they come in armed with pages of research and multiple price quotes from other dealers.
"They don't need us anymore," said Jamie Darvish, son of John Darvish and vice president of his family's company, Darcars Automotive Group of Silver Spring. "They can check 10 other dealers, and it's the same car everywhere. And they don't even have to leave the house."
Now these super-educated customers, who sometimes know more about a car's features than the salesperson, are posing another challenge to those in the business of selling cars: keeping up with rapidly changing consumer tastes.
Washington area drivers had been slowly shunning domestic automobiles in favor of imports for years, and that trend was only accelerating until this summer, when the Big Three automakers offered steep employee-pricing discounts that sent buyers flocking to domestic vehicles. But those incentives are petering out, and now that gas prices are soaring, drivers are not only moving away from domestic cars, but they're also rejecting bigger sport-utility vehicles in favor of smaller, more fuel-efficient cars.
"Over the Labor Day weekend, I saw the biggest shift that I have seen in recent times from trucks to cars," said Vincent A. Sheehy, president of Sheehy Auto Stores, which has dealerships in Virginia and Maryland. "We are sold out now of Nissan Sentras, Ford Focuses, Chevy Aveos. All the small cars have suddenly become a hot item on our lots, and these are vehicles that six months ago might've been a little more of a struggle to move."
Some local dealers have been left grappling with inventory problems, as they try to get the right mix of vehicles on their new- and used-car lots. But executives say it's just another in a string of changes they have had to make in recent years.
At local dealers that once focused on making as much money as possible on each car, for example, the focus today is on volume and making money from other aspects of the business, such as used cars, service and body shops.
"Most of the dealers you'll find in D.C. are oriented the same way -- particularly the big dealers who are looking to grow," Sheehy said.
About 30 years ago, car dealers kept a 22 percent profit margin between the sticker price and the invoice price of a full-size vehicle, said Art Spinella, president of CNW Marketing Research Inc., a market-research firm in Bandon, Ore. Most customers would pay the sticker price, he said, and only 17 percent of car buyers would try to negotiate a price lower than the manufacturer's suggestion.
Today, dealers' profit margin has shrunk to 7 percent, he said.
As consumers have become more informed, they are demanding prices closer to the number on the dealer's invoice. And with more models offered, the competition between brands, and even within brands, is increasing.
"It started with Consumer Reports," Spinella said. Magazines started putting out car-buyer guides in the early 1980s, and by the mid-1990s, consumers could easily find the information online. Today, 70 percent of consumers do research on the Web before going to a dealership, according to the National Automobile Dealers Association.
That has changed the way salespeople negotiate and interact with consumers and sometimes makes a deal harder to reach.
"A lot of people come with unreasonable expectations from the Internet," said Neil Kopit, director of marketing for Gaithersburg-based Criswell Automotive. "They expect that whatever price they find anywhere is just a starting price. They don't know where the bottom line is."
Making a deal has to happen much faster now, executives say, because there are fewer "tire kickers" wandering into showrooms. To capture such highly informed, motivated buyers the minute they walk in the door, dealers have been beefing up training sessions for salespeople.
"Twenty years ago, our idea of training was, put them all in a room and show them a couple of tapes, or sit and keep talking to them about how to sell a car," said Tammy Darvish, also a vice president for Darcars. "Now the manufacturers all have very structured training programs."
The changing nature of the business is evident in Darcars' revenue breakdowns. The percentage of revenue the company got from new car sales declined to 26 percent last year from 44 percent in 1995. On the other hand, used cars now account for 24 percent of revenue, up from 22 percent, service is up to 20 percent from 13 percent, auto parts have grown to 22 percent from 18 percent, and body-shop revenue has climbed to 8 percent of the total from 3 percent.
The Darvishes have taken a more hands-on approach in selling, too. Darcars contacts its customers about four times a year via e-mail or telephone to remind them that their service is due or to promote deals at the dealerships. And they have tried to attract more customers to the store by offering DVDs, XBoxes, and PlayStations for children, as well as Internet access.
By adding consumer appeal, "you are making the dealership a destination," said Paul C. Taylor, chief economist with the McLean-based National Automobile Dealers Association.
Still, executives say that the best way to make a dealership into a destination is to have the cars people want, although knowing what that car is can be a problem.
"For the first time in a long time this summer, we had some buyers switch from import cars to domestic cars," said John J. Pohanka, chairman of Pohanka Automotive Group. "It's nice to see."
But it was a short-term spurt, in all likelihood, because the general trend in the Washington market has been toward import cars. For three decades, Pohanka said he has pushed his dealership to be less dependent on the Big Three domestic carmakers by adding brands such as Honda, Acura and Lexus. In the Washington area, after a steady rise, an overwhelming number of drivers are behind the wheel of an import car, Pohanka said.
It's not always easy to keep up, but it's critical: Even if a dealer can weather a decline in sales by shaving staff and costs, eventually the business will be robbed of much-needed revenue from the service department because it's just not selling enough cars, Pohanka said.
"The inventory mix is one of the biggest challenges a dealer has," he said.
And now there's more change afoot for car dealers, as buyers flock to more fuel-efficient models. In August, the Big Three automakers sold 514,200 light trucks, down from 550,500 in August of last year. And some analysts think the gas-guzzlers have other problems.
"I think that a lot of the big SUVs got oversold," said Hank Stoddard, manager of industry analysis for WardsAuto.com. "A lot of people who bought those SUVs thought they probably made a mistake in the first place -- people realized they couldn't even pull their Suburban into their garage after they brought it home."
These issues are exacerbated in this area, dealers say, where the overwhelmingly white-collar, educated buyers think long and hard about issues such as fuel efficiency.
"Dealers particularly feel it in the used-car area, where a dealer might have an oversupply of cars that just a short time ago were selling very well," Pohanka said. "The larger sport-utility vehicles, for example -- all of a sudden, people are sort of staying out of the market for that kind of vehicle."
That's especially bad news for automakers, though, because they make more money on large SUVs than on small sedans. A typical SUV might cost about $15,000 to produce, said Jesse Toprak, senior analyst for Edmunds.com, but might have a selling price of closer to $25,000. Small sedans, by comparison, cost about $12,000 to make and carry an end price close to that.
Automakers defend their product lineups, saying they have been planning for higher gas prices by increasing the fuel-efficiency ratings of their fleets. Ford Motor Co., for example, is stressing that the new version of its popular Explorer SUV has a 10 percent improvement in fuel economy.
"It's very hard to say that people are seeing these gas prices and completely turning away," said Whitney Drake, a spokesperson for Ford. "It depends, regionally, where you are."
GM is also stressing the improvements in its 2006 models, in both efficiency and value pricing. "You're going to be hearing about the improved fuel economy these vehicles have versus the previous models and the competition," said Jerry Dubrowski, of General Motors Corp.
That will be critical given GM's major rollout next year of a new platform of large-size SUVs, the GMT-900 series.
In the meantime, Washington area auto dealers are scrambling to stock the cars that drivers want to buy. But they're not worried because at least people are still buying.
"Dealers are an amazingly resilient bunch," Sheehy said. "Yes, we'll have a 90- to 180-day inventory hiccup, but once we get through that and we adjust our inventories, we'll do fine."
In the driver's seat, Cassie Hall, 10, checks out a Toyota Rav4L with her friend Emily Cleaveland, 11, at Darcars' Toyota dealership in Silver Spring.
John Darvish is president of the family company, Darcars.