Last month hundreds of people walked into Jones Junction in Bel Air and bought Chryslers, Hyundais, Jeeps, Subarus and Nissans. Even Toyotas!
They were not herded in at gunpoint. Nor were they financed by subprime lenders heedless of repayment. Many were staked by real banks with trained lending officers inquiring about their income and jobs.
Nobody from government bribed these folks to buy cars. The $3 billion cash-for-clunkers program ran out almost a year ago. The buyers made rational decisions based on their needs, their private wherewithal and their appraisals of the economy.
Look President Obama, no stimulus!
This spring's moderately encouraging auto sales do not ensure that unemployment will soon fall from the 10 percent range. But they prove an important proposition: At least part of the economy can lurch forward without Washington's electrodes and superchargers. Now that the housing industry, too, is trying to fly without federal fiscal help, the car business offers modest encouragement.
"It's a real market. It really is," says Steve Smeltzer, Jones Junction's general manager. "If people think the economy's better, they're thinking, 'I have confidence now and, yes, we need a new car.' That's what I'm seeing."
Maryland dealers sold 25,844 new cars in April, up 29 percent from the level of April 2009, near the depth of the financial crisis, according to the Motor Vehicle Administration.
And if dealer anecdotes and national reports are any indication, MVA figures due today should show that Maryland new-car sales rose by a similar amount in May compared with sales in the same month in 2009.
For May, on a national basis, Ford, Kia, Nissan Hyundai all reported year-over-year increases of more than 20 percent, according to news reports. General Motors was up 17 percent. The national May increase for Chrysler and Subaru exceeded 30 percent.
Some buyers even have to wait for the cars they want.
"May seems to have followed up on April. Most people had a pretty decent month," says Peter Kitzmiller, president of the Maryland Automobile Dealers Association. "Inventories are getting kind of short, and that has not been the case for a long time."
Even bankers have returned. One huge risk for the recovery has been that lenders would continue to withhold credit from solid borrowers. But in the car industry, at least, there is evidence that lenders are getting back in the business of lending.
"If you have reasonable credit, we're able to get you financed at this point," said Kitzmiller. "A year and a half ago, it was very, very difficult."
The terrible economy did prompt a used-car boom. Demand is so high that used cars are among the few items putting upward pressure on consumer prices, according to the Labor Department. In March Marylanders bought 62,510 used cars, the highest monthly total since 2007. The figure for April — 61,229 — wasn't much lower.
But cars, unlike the federal debt, don't last forever. Even after the "clunkers" trade-in program, the typical car on the road is a lot closer to the junkyard than the dealer showroom. The median age of U.S. cars in 2008 was 9.4 years, according to R.L. Polk & Co., a record high. Nobody expects the 2009 figure to be much lower when Polk announces it in a few weeks.
An increasingly junky auto flotilla piloted by red-blooded, car-loving Americans equals what economists call pent-up demand.
"Car sales emit faint whiff of recession," was the headline on a column I wrote in September 2007. Let's hope that, this time, Maryland car sales herald a sustainable recovery.
True, sales are still far below pre-recession levels. National new-car and light-truck sales will be lucky to top 10 million this year, a hurdle that had been exceeded every year from 1992 until the financial crash. Before getting too excited about Maryland's 25,844 new-vehicle sales for April, consider that in April 2005 dealers sold 36,609 new cars and light trucks.
"Our business is definitely moving in the right direction," says Jeff Grossman, general manager at Norris Automotive. "I don't think we're foolish enough to think it's going to go from zero to 100 overnight. It's going to be a slow recovery."
Many recent auto deals have been fleet sales to corporations and, yes, government. Vestiges of the huge American Recovery and Reinvestment Act of 2009 are buoying all industries, at least indirectly. So is massive government hiring for the 2010 census. Short-term interest rates of near zero percent from the Federal Reserve aren't exactly hurting, either.
So it's an exaggeration to say that the auto business has completely shed its government-sponsored training wheels. For its part, the housing trade will almost certainly not graduate from its fiscal stimulus — the home-buyer tax credit — as successfully as the car sellers.
The home credit expired in April. Newly signed home-purchase contracts plunged 30 percent the next month, compared with the number of deals signed a year earlier, The Baltimore Sun reported last week.
Still, the recent bump in auto sales shows that, somewhere down there, underneath all the incentives and deficit spending and Monopoly money, there may be a real economy waiting to break out.