This Week in Car Buying: Incentive-fueled sales hit record; Book a Cadillac; Yes, there is a 2017 Honda Odyssey; Transaction prices peak
Defying earlier predictions of not surpassing 2015’s record, the industry retailed 17.5 million light vehicles in 2016, edging out the previous mark by about 56,000 units. The new record was achieved with massive holiday sales events that saw average incentives ranging 20 to 25 percent higher than normal.
Trucks were the big winners growing 6 percent, thanks to low fuel prices and the introduction of hot- selling midsize models like the Chevrolet Colorado and GMC Canyon. That bump compares favorably to an increase in overall sales of just 0.3 percent. Ram posted the largest percentage rise in year-over-year sales among mainstream brands, with an 11.1 percent increase. In the luxury segment, BMW sales were down 10 percent while Jaguar more than doubled its sales from just below 14,500 to over 31,000. Volvo also posted a healthy 18.1-percent uptick in annual sales and Lincoln posted a 10-percent gain.
The stronger than expected sales and high incentives may see the industry pulling back from the big discounts now that the sales programs have expired. No doubt January will suffer a bit from sales being pulled forward into December. Softer demand could result in either more incentives down the road or curtailed production. GM, Ford and Chrysler have announced temporary plant shutdowns and have eliminated some third shifts at facilities that produce slow-selling sedans and compact cars.
The biggest risks facing the industry in 2017 are bloated inventories, high incentives/price wars, and a huge wave of off-lease and late-model used vehicles hitting the market. The glut of used cars will put price pressure on not only the second hand market, but also on new purchases. The new year is shaping up to be a buyer’s market when it comes to both new and used cars.
Book a Cadillac
Cadillac announced its new Book a Cadillac program that allows customers to “subscribe” the company’s products on a monthly basis with no lease or purchase commitment. This car-on-demand service costs a flat $1,500 per month and through an app allows users access to Platinum trim level versions of the XT5, CT6, Escalade and V Series models. Cadillac will deliver vehicles to locations specified by the customer.
“Book by Cadillac is an innovative new option targeted at a growing class of luxury drivers searching for access to various cars over time, dependent on their individual needs and coupled with a hassle-free white-glove exchange,” said Uwe Ellinghaus, Cadillac chief marketing officer.
For example, Ellinghaus said a customer could opt for an Escalade over the summer months for road trips, while selecting a smaller XT5 for use in town during the winter. Or if the user has an enthusiast bent, can pick from any number of the division’s V-Series performance sedans. The $1,500 fee covers registration, taxes, insurance and maintenance cost and there is no limit on mileage. Cadillac will launch the program this February in the New York metro area and roll it out over time into other markets.
Yes, there is a 2017 Honda Odyssey
One of the highly anticipated debuts at the North American International Auto Show in Detroit will be the all-new 2018 Honda Odyssey. While that new model is expected to hit the market this spring, the Japanese automaker recently released details on the 2017 model, which began to roll into showrooms last month and will be offered until there are sufficient 2018 Odysseys in the pipeline.
This shortened model year for the 2017 still makes the Odyssey worth a look for minivan intenders. For one, rather than opt for a 2016 model, which is now a year old and as a result has a lower resale value, buying a 2017 foregoes that immediate depreciation. Honda has also sweetened the deal with upgrades to SE and EX-L models that benefit from expanded availability of an acoustic windshield as well as adding some features found on more upscale variants. Among these features are the rear entertainment system, forward collision warning, SiriusXM satellite radio and the HondaVac vacuum.
Pricing starts at $29,850 for the base LX, $33,000 for the EX and $33,950 for the Special Edition SE. The EX-L starts at $36,500, while EX-L with rear seat entertainment is $38,100 and $400 more when navigation is added. The Touring model is priced from $42,755 and the range topping Touring Elite is $45,325. All prices exclude $900 delivery.
Average transaction prices peak
Not only did industry sales hit a new high in December, the average transaction price (ATP) for light vehicles posted a new record during the month coming in at $35,309, according to Kelley Blue Book data. The ATP is up 1.5 percent or $521 over December of 2015.
“Even though transaction prices are at an all-time high, incentives have grown similarly to counterbalance the increased prices,” said Tim Fleming, analyst for Kelley Blue Book. “Higher average transaction prices are reflective of the rapid shift in consumer demand away from cars and into trucks and utility vehicles, which are more expensive. Should the sales mix of cars to SUVs reach a stable point in the new future, actually transaction price growth could match or fall just short of inflation.”
Chrysler saw a 10 percent gain in its ATP, largely on the strength of its all-new Pacifica minivan. All-new vehicles tend to sell closer to the MSRP than older models. Ford saw its ATP climb 3 percent due to the popularity of the more expensive Sport and Platinum trims on its Explorer, which was up 11 percent. Lincoln’s new Continental helped to push up that brand’s ATP by 3 percent to $57,135.
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