This Week in Car Buying: Holiday sales wrap-up; Near-record sales predicted; What's Hot, What's Not
As the year draws to a close, automakers are getting ready to end their holiday sales events January 3 with some of the biggest discounts of the year. As manufacturers look to curb production to better manage inventories, it’s likely there may be a short pause in incentive programs. This will give the industry time to see where the market is headed before deciding on another round of incentives.
With the books closed on 2016, there’s little incentive to gun sales volume since the first three months of the year are typically the quietest of the year, particularly in Snowbelt states. There may be a few spiffs rolled out over the President’s Day weekend in February, but don’t expect any large-scale programs at least until the spring selling season begins in earnest.
This weekend could provide some of the best deals, especially as those manufacturers look to snag sales crowns. Incentives can range from anywhere as low as $500 on some 2017 models to over $10,000 on leftover 2016 models—a case in point is the 2016 Ford Expedition.
Luxury car buyers will also be the beneficiaries of generous offers. Audi has cash back of up to $5,000 on 2016 A8 and S8 models, and up to $3,000 on 2017 models. Mercedes-Benz is opting to offer low interest rates, ranging from 1.9 to 2.9 percent depending on model, while BMW is offering $1,000 plus low interest starting at 2.9 percent. Jaguar has $2,000 on its F-Type sports car and $1,000 on XF and XJ sedans, while 2016 models of those two cars are eligible for up to $3,000 cash back.
December to remember
The heavy incentives that were rolled out long before the Thanksgiving holiday have had an effect on the market, with December estimated to be the biggest sales month of the year, according to Kelley Blue Book. While calendar-year sales will be close to last year’s record levels, the industry is not expected to exceed those sales thanks to a softening of the market in late summer.
“December is shaping up to be the biggest sales month of 2016, even though it will likely fall short of last year’s record results,” said Tim Fleming, an analyst for Kelley Blue Book. “At year-end, 2016 light-vehicle sales should total 17.4 million, just 0.1 percent short of 2015’s record year. Sales for the month will be boosted by plentiful retail incentives featured in many holiday sales events across the country, and one last push to hit year-end sales objectives.”
While great news for consumers, the big incentive programs also underscore a weakness in the market that may extend into 2017. KBB expects next year’s sales to total somewhere between 16.8 and 17.3 million, which would be about a 1 to 3 percent decrease over 2016 volume.
“Substantial incentive hikes this year haven’t resulted in retail growth,” Fleming explained, adding that “inventories continue to grow. An increasing supply of used cars, especially off-lease units, is already putting pressure on residual values, which could impact the sustainability of today’s high levels of leasing. We are looking for manufacturers to cut production in the New Year to better match slowing consumer demand and alleviate the need for elevated incentives.”
Part of that softness is also reflected in a slight decrease in retail sales in December, which are expected to drop 0.3 percent from 81.4 to 81.1 percent of the market.
What’s hot, what’s not in 2016
In looking over sales data from 2016, Bloomberg has compiled a list of what was hot during 2016 and what wasn’t. It expects the big winner in overall sales will be the Ford F-Series pickups, a perennial volume leader. This year, the wire service expects sales to hit about 800,000 for the pickup. Bloomberg also looked at what individual models posted the biggest gains and which ones saw the biggest declines.
With the crossover SUV market on fire, it’s no surprise that one of the top gainers last year was Infiniti’s QX50, which saw a 272-percent increase in volume after its refresh. Close behind was the Mercedes-Benz GLE with an increase of 221 percent, outselling its less expensive GLC and GLA siblings as well as the venerable E-Class sedan. The BMW X1, which competes in the entry-level luxury crossover segment, saw an 88-percent increase thanks to a redesign that brings its look more in line with the larger X3.
Volvo’s resurgence is real as shown by the XC90 SUV, which saw a 202-percent increase in volume. The 2016 North American Truck of the Year winner is all-new and is drawing customers from domestic and import SUV buyers alike.
Sports cars appeal to a small sliver of the market, but it’s worth noting that the Audi TT, which sold around 3,000 units in 2016, is up 202 percent.
As far as what’s not hot, economy and luxury cars alike suffered thanks to declining interest in small cars, coupes and sedans. Honda Fit saw a 43-percent drop in its volume, due probably in no small part to declining gasoline prices. Likewise, Fiat Chrysler Automobiles' compact hatchback, the Fiat 500L, saw its sales drop by 60 percent. The quirky 500L, which is not really a crossover SUV nor as nostalgic as the Chrysler PT Cruiser, has failed to connect with an audience it can call its own.
Speaking of Chrysler, its 200 sedan, which is being discontinued after the 2016 model year, failed to live up to expectations as a Honda Accord and Toyota Camry rival. Despite huge incentives, sales declined 65 percent, leading FCA to convert its factory over to building the next-generation 2018 Ram pickup.
Luxury cars also face tough sledding. The BMW 6 Series, which offers both a coupe and a coupe-styled sedan, had a 46-percent drop in sales, while Kia’s K900, the company's bid to offer a range-topping flagship sedan to rival true luxury cars, had a volume drop of 68 percent.
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