Vehicles are usually the second most significant purchase people make, with home purchases topping the list. So when your home equity is going down, purchasing a new vehicle might not be your best option. Does that mean the housing meltdown is causing people to spend less money on cars? That's how the management team at AutoNation (NYSE:AN), America's largest automotive retailer, sees it.

Second-quarter revenue totaled $4.6 billion, down from $4.9 billion in the year-ago period. The drop was driven primarily by a 10% decline in new-vehicle unit sales. Used-vehicle sales dropped by a more modest 6%.

In California and Florida, things were worse. New-vehicle retail sales dropped approximately 14%, and new-vehicle unit sales declined 16%. That's crucial, because California and Florida represent approximately 50% of the company's new-vehicle business, and 20% of the entire industry's new-vehicle retail sales in the United States.

CEO Mike Jackson makes a case for tying the state of the vehicle industry to the housing downturn:

The second quarter was a challenging economic environment for new vehicle sales driven largely by continued weakness in the housing market in our key markets of Florida and California.... A key force behind consumer spending in recent years was the perceived growth in household wealth consumers had from the value of increasing home prices and readily available home equity credit. With the slumping housing market, consumers have been less willing to purchase big-ticket items, including vehicles. We expect to continue to see a challenging new vehicle retail market as long as the housing market difficulties persist. 

As for earnings, they seemed to have survived the downfall at first glance. The company reported net income from continuing operations of $79 million, or $0.38 per share, compared with year-ago net income from continuing operations of $74 million, or $0.33 per share. But a one-time debt-repurchase expense of $0.09 a share during last year's second quarter skews the numbers a bit. Accounting for that charge, true earnings actually declined year over year. What's more, AutoNation continues to buy back stock, an action that affects the earnings-per-share number even more. Common shares outstanding now stand at 208 million, versus 225 million last year at this time.

As long as home values continue to fall, it would not be a surprise to see a continued strain on the new-vehicle market. In the meantime, this consumer shift might bode well for the like of used-car dealers such as CarMax (NYSE:KMX), or auto-parts suppliers such as AutoZone (NYSE:AZO) or U.S. Auto Parts (NASDAQ:PRTS)

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Fool contributor Sham Gad owns has no positions in the companies mentioned here. Reach him at