This Week in Car Buying: High loyalty among crossover owners; Volvo Midsommar sale; VW CPO incentives; Wells Fargo reins in car loans
Signs of resurgence in the traditional sedan market aren’t good as a new study reveals that two-thirds of current crossover/SUV owners are likely to buy another. The research by IHS Markit indicates that consumers who own that body type interested in purchasing another reached an all-time high in April at 66 percent, up from 53 percent in 2012.
The loyalty rate is 13 points higher than the industry average. The segment’s popularity is reflected in the sales numbers as the first half results show that the top sellers from Nissan, Toyota and Honda are crossovers and that the Chevrolet Equinox outsold Cruze, Malibu and Impala combined, according to Automotive News. Light trucks now account for 63 percent of all new vehicle sales.
“While one can make the case that a factor (in the high loyalty among crossover and truck owners) is gas prices, there are some other key drivers to sport and crossover utility,” Tom Libby, manager of automotive loyalty and industry analysis at IHS Markit told the trade paper. “One is the wide range of selection in price and size of crossover vehicles. SUVs also have the appealing combination where the driver gets the comfort level of being in a car, but also gets the versatility of being in a larger vehicle.”
As loyalty rates are rising among these truck segments, IHS Markit is seeing a corresponding decline among consumers who will stay with sedans. Through the first four months of 2017, that number stood at 49 percent, down from 56 percent five years earlier. Fully two-thirds of sedan owners who purchased another vehicle bought a crossover or SUV, which represented nearly 300,000 sales. Still, Libby is not ready to predict the demise of that body style. “While loyalty in sedans has gone done, sedans aren’t going away. Sedans still play a significant part in the market and that’s not going away anytime soon.”
Volvo Midsommar sale
Drawing on its Swedish heritage to name its summer sales event, Volvo has launched what it calls a Midsommar sale with a wide range of cash incentives on its lineup. Two of its biggest cash offers come on a crossover SUV that’s being replaced and its flagship sedan. Volvo is offering up to $4,500 off the 2017 XC60 as well as on its S90 sedan. An all-new 2018 XC60 will be hitting showrooms soon.
Other incentives include $1,500 rebates on the XC90 SUV, the S60 midsize sedan and a pair of wagons, the V60 and V60 Cross Country models. The recently introduced V90 Cross Country wagon is eligible for up to $750 cash back.
Volkswagen’s CPO incentives
Volkswagen appears to be putting the diesel scandal behind it, as we noted last week that June sales have climbed 15 percent. Certainly the wide range of lease deals and incentives all across their model range (there’s incentives on everything except the high performance Golf R) is helping, as well as the introduction of some key entries, like the new 2018 Atlas and 3-row 2018 Tiguan in the crossover SUV segment.
Another part of that rebuilding effort, now it appears, is getting people into pre-owned VW’s as well. Volkswagen now has an incentive program for its CPO vehicles and is offering as much as $500 off the first month’s payment as well as a factory-supported 2.49-percent loan over 60 months from Volkswagen Credit.
Wells Fargo reins in car loans
The nation’s leading purveyor of car loans, Wells Fargo, is cutting back on new contracts, according to a Bloomberg report. As a result of new underwriting standards adopted by the San Francisco-based bank, new auto loans have dropped by 45 percent in the second quarter to $4.54 billion. Bloomberg said Wells Fargo’s automotive loan portfolio is about $58 billion and may in fact be eclipsed by second largest lender Ally Financial’s $58.8 billion. The report said the cutbacks resulted in an outstanding loan portfolio that is at its lowest level in two years.
Part of the reason given for the new underwriting standards is the fact that there are an increasing number of new and used car loan borrowers that are behind in payments.
With Wells Fargo’s shift to tighter standards and writing fewer loans, both subprime and high qualified buyers may see loan rates start to climb not only as a result of this development, but the general tightening of credit in general as the Federal Reserve continues to hike rates. According to Bankrate.com, the average 60 month new car loan is up this week to 4.48 percent, up 0.6 percent. That 6 basis point increase is also being felt in shorter term 48-month loans, which now stand at 4.45 percent nationally as well as in 36-month used car loans, which average 4.96 percent.
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