This Week in Car Buying: Hunkering down for the holidays; brand loyalty isn't what you think
If there a time of the year to skip buying a new car, the first two weeks of November would be at the top of the list. While new car sales have set a blistering pace through October, early November has seen virtually all incentive activity except for Ford and Audi come to a screeching halt. Are automakers giving up on spiffs to move the iron as a result of strong sales? Not likely. Instead, this is the proverbial calm before a blizzard of "Holiday Sales Events" which feature winter scenes, bows and jingle bell jingles that will launch around Thanksgiving.
We will report on these offers as they gear up over the coming weeks. For now, though, according AIS the only programs running include Audi's 1.9-9.4-percent financing deals on select models, while Ford continues to offer both rebates and financing on both 2014 and 2015 Fords and Lincolns. In addition, Ford also launched a year-end dealer incentive program, according to Automotive News. The "Volume Growth Bonus Program" which runs through Jan. 2 will give franchises payments of $100 to $600 per car sold on C-Max, Fiesta, Focus, Fusion and Escape. The payments vary on a dealer's ability to meet certain sales goals, the higher the percentage met, the higher the payment.
Be true to your car
"Ask the man who owns one" is the iconic ad slogan coined by Packard. In it is the assumption of a great deal of brand loyalty. However, according to Experian Automotive, the length of ownership of a particular model is not necessarily a gauge of how committed an owner is to a particular nameplate, something that could have consequences in a market that is seeing more 72 month loans.
Experian's analysis shows that the longer someone owns a car, the less likely they are to replace it with a similar brand. Those who are more brand loyal, tend to turn their cars over more quickly and stay loyal in their next purchase or lease. The study says that people who own a vehicle for 12 months would purchase the same brand 57.3 percent of the time compared to those who have had a vehicle for 12 years would opt for the same make only 33.8 percent of the time. The data also shows that the biggest dropoff in loyalty comes after 36 months of ownership, where it declines 10 percent.
"Leases with their fixed length ownership cycle are typically strong contributors to brand loyalty," said Brad Smith, director of automotive market statistics for Experian Automotive. "Over the course of seven years of ownership, a lot of things change, including vehicle product offerings, vehicle budget and credit score. Additional, the increase in time between dealer interactions, whether they are for sales or services, increases the probability of a customer defecting to the competition."
So who's affected most? According to the study, Dodge and Buick lead the industry in length of ownership with an average of almost 10 years (113 months). Brand loyalty, the percentage of owners who would buy the same make again, was 22.6 and 38.4 percent respectively. Subaru had one of the highest loyalty rates of 59.4 percent for owners who hung onto their cars an average of 85 months. The only anomaly in the study was Ford, whose owners keep their vehicles for 110 months, almost as long as Dodge and Buick, but have the industry's highest return purchase rate of 61 percent, though this number may be skewed by the popularity and typically longer ownership cycle of the F-150 pickup, which has an extremely loyal owner base. Other top brands for loyalty included Toyota at 58.9 percent, Kia at 58.5 and Lexus at 55.8.
Sales remain hot, but transaction prices level
While October new vehicle sales increases 5.5 percent over 2013, new car transaction prices increased less than one percent, according to Kelley Blue Book data. The average new light vehicle price went up $246 to $33,361 year over year and up only $185 from September.
Among specific brands, the average transaction price grew the most at GM, which saw an overall increase of 3.1 percent, while the biggest drop came from Nissan, which had a 2.9-percent drop in prices. "Nissan continued to show declines in transaction prices, despite increasing sales by 13 percent this year," said Tim Fleming, a KBB analyst. "This is due partly to their mix, as the share of the brand's smallest cars, Versa and Sentra, made up more than a quarter of Nissan's sales."
Meanwhile, used car sales remained flat, according to CNW Research. However, franchised car dealers recorded a 2.2-percent increase in used car sales (to 1.2 million units) along with a 16-percent gain in transaction prices which average $15,678 or about half that of a new car. These gains were attributed to the growing number of off-lease cars, a trend CNW expects to accelerate over the next year. And like new car sales, the price of gas is having an impact on the sales mix. http://www.kbb.com/car-news/all-the-latest/this-week-in-car-buying-time-to-look-at-an-ev-or-hybrid/2000011305/ Used SUV sales are up 10 percent in a flat market, while passenger car share dropped 1.8 percent.