Go figure: The stocks of publicly traded dealership groups have posted some pretty hefty gains during the past month.
In fact, the stock prices of nine dealership groups shot up an average of 40% from Nov. 25 to Dec. 19. The increases come despite the fact that some of these companies have shed dealerships and posted quarterly losses and lower vehicle sales volume.
To be honest, I’m not really sure how to explain the gains. The stocks of America’s Car-Mart [ticker: CRMT] and Asbury Automotive [ticker: ABG] have climbed 39% and 35%, respectively, in the past month. Lithia Motors’ stock [ticker: LAD] shot up 86%, and Sonic Automotive’s [ticker: SAH] skyrocketed 131%.
The stock of CarMax Inc. [ticker: KMX] was down 6% for the month. Before posting a $21.9 million loss on Friday, though, its stock had been 6% higher.
I suppose some of these dealership groups are benefiting from buyers looking for used vehicles rather than new ones, but I can’t imagine that’s the sole reason. If you’ve got any thoughts about it, feel free to comment here.
Like a lot of what we’ve seen in the market, this stock price increase is unlikely the result of anything other than speculation and emotion. Given that Sonic was trading at over $14 just 6 months ago, I would not get too excited about a 40% lift over last few weeks given that its trading at $3.50 today, and the fact that its down almost 15% just today !
Leasing is often manipulated to drive sales of vehicles, but back-to-basics leasing began in 2009 and unfortunately we are already retreating. It is unfortunate that simple/realistic leasing programs are not the norm in the retail market. Consumers should be driving cars they can afford and choosing to lease if it suits their financial goals, holding period, and stance on risk, NOT because the Civic is $159/month. This creates unrealistic expectations, setups potentially huge losses for termination said leases early and nearly guarantees losses for the captive finance/leasing company at lease-end. Leasing is being bastardized again, allowing manufacturers to avoid rebates and incentives that would be utilized in a normalized marketplace. Ricky is spot on and Black Book and other such guides are shooting for realistic residual values in the future with no notable gain or loss for the lessor and an accurate reflection of depreciation of a vehicle over time. Why must we decive reality — it always comes back to bite? Adam Berger – out