This Week in Car Buying: Dealers worried about 2019; Chevrolet offers employee pricing; Deals of the month; Subprime lending falls
Dealers are expressing concerns over the possibility of a softening market next year, according to the Cox Automotive Dealer Sentiment Index for the fourth quarter. It’s the first negative result in the survey, which began quarterly over a year ago.
"We've reached a point in which dealers are clearly communicating to us that it's going to be very hard for their business to continue to be profitable and growing," Cox Automotive Chief Economist Jonathan Smoke told Automotive News. "You look at the underlying metrics that we track and the data, and it relates to inventory, it relates to credit access for consumers, it relates to interest rates both for consumers and for themselves."
Dealers believe the market will soften, interest rates will rise and that they will face more intense competition from their rivals. Smoke also was surprised with how quickly sentiment has shifted from optimism to pessimism for the upcoming year. While dealers were optimistic early in the year for the market because of tax policy changes that led to larger refunds, now they are concerned about possible impacts of tariffs on the market.
The poll, conducted in late October and early November, has responses from 1,124 dealers, 610 who are franchised and 514 independents. Franchise dealers remain optimistic overall, with 51 percent expressing an upbeat attitude, but that’s down from 59 percent earlier in the year. Only 44 percent of all dealers rated the market as favorable, down from 51 percent.
"We know we're in trouble when the optimism goes out of the positive category," Smoke said. "We are back to an environment where dealers are describing the current market as weak rather than strong."
While dealers are concerned about the health of the new car market, the survey showed that most dealers have a positive view of the used-vehicle market. Optimism scored 57 percent, down from 60 the previous quarter, but still higher than the view of new vehicle sales.
Chevrolet employee pricing offered
Chevrolet sweetened the holiday sales event pot with its “Employee Discounts for Everyone” on all remaining 2018 models and 2019 Chevrolet Equinox, Traverse, Colorado and Silverado 1500 Limited models. The program was run last year about the same time and company officials said they were so pleased with the results, they brought it back to help boost year-end sales numbers. The promotion runs through Jan. 2.
Among the discounts touted on Chevrolet’s website is a 2018 Tahoe Premiere with $7,402 in employee pricing savings plus $3,750 cash allows for a total discount of $12,500 when financed through GM. The 2019 Equinox is offered with a $3,264 employee discount plus $2,750 cash back for a price about $6,000 below MSRP. Traverse is eligible for about $4,400 in discounts, while on the car side, the deals range from $4,000 off on the Spark to over $8,000 on Impala.
Deals of the month
As the industry closes out the year, there are some enticing deals that could make for happy holidays when it comes to parking a new vehicle in your driveway. Among these offers are five leases for less than $200 and substantial rebates of as much as $5,000.
First the leases. Acura is offering 2018 ILX compact luxury sedans for $199 per month for three years with $2,499 due up front. Kelley Blue Book estimates the fair purchase price of this sedan at $24,224 on an MSRP of $29,055. Hyundai has its 2018 Tucson on a 3-year deal with less down, $1,399 for the same $199 per month. For $20 less per month over 36 months, the 2018 Honda Civic requires $2,199 for its $179 per month payment. The 2019 Hyundai Veloster is slightly more at $189 per month over three years with $2,299 down. The last under $200 per month lease comes from Kia on its 2018 Soul. Monthly payments are $189 on a 36-month contract with $2,652 down. If you’re in the market for a compact crossover SUV, Mazda has you covered with a 2018 CX-5 on a $215 per month 3-year lease with $2,489 up front cash.
Among the rebates being offered, Ford is giving $5,000 cash back on its 2018 Ford Fusion sedan and 2018 Explorer SUV. Chrysler has $4,000 cash on its 2018 Pacifica, which KBB estimates a fair purchase price of $28,394 on a $30,890 MSRP. Over at its sister Jeep division, the 2018 Jeep Grand Cherokee carries a slightly richer rebate of $4,250. All offers expire Jan. 2.
Bonus Content: Does it pay to shop at the end of the month?
Subprime lending falls
Concern over risky subprime loans is beginning to ease on news that these contracts held by consumers with low credit scores have hit their lowest overall share of the market in 11 years, according to a finding by Experian.
In its latest State of the Automotive Finance Market, the credit and analytic specialist said subprime auto loans accounted for 21.19 percent of total loan originations, down 1.5 percent from a year ago. These borrowers typically have credit scores between 501 and 600, while deep subprime is a score between 300 and 500. The reason the share of subprime has dropped is due to a larger increase in the loan activity among prime borrowers, or those who are good credit risks. And many of these buyers are also fueling an upturn in used vehicle financing.
Experian also reports that average monthly payments for both new and used vehicles have reached record highs. The average monthly payment for a new vehicle is now $530, while used vehicles average $381. And the $149 gap between the two has widened by $13 per month over the last year.
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