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Prices, taxes cool this summer

Economy: Consumers are paying less at the gas pump and the checkout lane this season

Posted: July 1, 2011 1:55 a.m.
Updated: July 1, 2011 1:55 a.m.
New cars sit on the lot at Power Honda Valencia. As summer heats up, gas prices and the sales-tax rate are falling. New cars sit on the lot at Power Honda Valencia. As summer heats up, gas prices and the sales-tax rate are falling.
New cars sit on the lot at Power Honda Valencia. As summer heats up, gas prices and the sales-tax rate are falling.

Summer is finally heating up and along with it some good news for consumers.

Gas prices continue to drop at the pump, and the statewide sales tax falls back to 8.75 percent today, a decrease of 1 percent on every dollar spent.

The tax rate dropped due to the expiration of temporary tax hikes imposed in 2009. The tax increase was originally imposed to help cut the state’s budget deficit.

While consumers will mostly feel the sales tax savings on a cumulative basis over time, they’ll notice immediate, noticeable drops in the overall purchase price when buying bigger ticket items — like cars.

Add up the savings of lower sales taxes and gas prices combined, and consumers may be more likely to consider buying that new vehicle they’ve been eyeing.

“It’s a great thing to see taxes go backwards for a change,” said Carlos Dominguez, general manager with Power Honda Valencia.

Holiday sales
Experts say there is still a lot of pent-up demand in the market. And with that demand arrives the Fourth of July holiday, a weekend full of promise of sales on big-ticket items, such as electronics and automobiles.

“I feel the public will love saving money,” said Daniel Sterkel, general manager of Nissan of Valencia.

Consumers can also save on their auto leases as a result of the drop in sales tax. And the monthly lease payment for those who already have a leased vehicle will drop as well, Dominguez said.

Southland sales of vehicles are up nearly 22 percent year-to-date through May, over 2010 the Southland Motor Car Dealer Association reports.

Sales of light trucks are running slightly ahead of cars in terms of sales gains. In terms of vehicles purchased in the Los Angeles market, cars are outselling light trucks by nearly a 3-to-2 ratio in 2011.

New-car inventory and sales of used cars are making for a decent year so far, Dominguez said.

Though there have been reports in the media regarding delayed delivery on some new vehicles due to the earthquake in Japan, Dominguez believes that will quickly become old news.

“Come August we should be almost back to normal,” he said. “The worst is behind us.”

Fuel costs
As reported in The Signal earlier this week, gas prices dropped to between $3.73 and $3.89 per gallon for regular unleaded fuel.

Lowered fuel prices at this time of year run counter to the usual summer trend of prices rising, based on demand for more fuel as more people hit the road in pursuit of summer activities and family vacations.

This summer, gas prices not only dropped — reports are that prices are expected to continue dropping.

Lower fuel prices and reduced sales taxes benefit the community. Enhanced disposable income often translates to increased consumer spending, experts say.
Local market
California sales tax is the highest in the country, according to Tax Foundation, a 501(c)(3) tax-exempt educational organization.

There are, however, states with higher local tax rates, bringing their combined total tax rate closer to California’s combined state and local tax rate. Tennessee ranks first in the country with the highest combined sales-tax rate.

The decrease in state sales tax taking effect today is good news for consumers. And good news for shoppers may be good news for Santa Clarita.

If consumers’ pent-up demand translates purchasing more autos this year, that’s good news for the city, Sterkel said.
Automotive sales represented 15.1 percent of all retail sales in California during 2010, reported the National Automotive Dealers Association.

Of that sales-tax amount, Santa Clarita receives 1 percent to feed the general fund. Revenue in the general fund supports local services, such as the Sheriff’s Department, parks and recreational programs.

Sales by local auto dealers represent 24 percent of the revenue in the city’s general fund, said Ken Striplin, assistant city manager.

“Lower sales taxes aren’t just good for auto sales,” Sterkel said. “It’s great for our whole community. Anything that helps consumers save while spending their hard-earned money is good for everyone.”


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