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This Week in Car Buying: Inventories grow; Used cars flood market; Many are leasing to buy; Volvo prices XC60

By Matt DeLorenzo on May 19, 2017 3:30 PM
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Slowing sales coupled with GM’s decision to build stocks ahead of the summer shutdown is causing an increase in the vehicle supply, which means buyers will have plenty to choose from for the foreseeable future. In addition, the higher inventory levels guarantee that there will be plenty of incentives to consider when shopping for a new car.

According to Automotive News, automakers had a 76 days’ supply of vehicles on the ground May 1, up 6 days from a year earlier and a 3-day hike from April. Days’ supply is the number of days it would take to sell all the vehicles in inventory at the current sales pace. Generally, a 60-day supply of vehicles is considered ideal.

GM’s vehicle stock grew by an additional 2 days from April to stand at 99, the second highest to Mitsubishi’s 123-day supply. Ford has 83 days’ worth, while Nissan and FCA both are at 80. BMW, which trimmed inventories to 36 days last month to have the leanest pipeline, saw its numbers go back up to a 52-day supply, while Subaru reasserted itself atop the list with a 44-day inventory, followed by Mercedes-Benz which had 50. Subaru’s inventory reflected industry trends by growing 6 days from April 1 levels.

GM’s vehicle stock grew by an additional 2 days from April to stand at 99, the second highest to Mitsubishi’s 123-day supply. Ford has 83 days’ worth, while Nissan and FCA both are at 80. BMW, which trimmed inventories to 36 days last month to have the leanest pipeline, saw its numbers go back up to a 52-day supply, while Subaru reasserted itself atop the list with a 44-day inventory, followed by Mercedes-Benz which had 50. Subaru’s inventory reflected industry trends by growing 6 days from April 1 levels.

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Among individual models, the vehicle with the highest days’ supply is the Acura RLX, which stands at 245 days, followed by the Buick LaCrosse at 232, underscoring the weakness of the full-size sedan market. On the other end of the scale, two Honda crossover SUVs, the Pilot and CR-V, are among the vehicles in shortest supply, the Pilot at 35 days’ supply and the CR-V at 38. The low numbers are indications of how quickly they are selling, which also means that buyers are less likely to find generous incentives on those models.

Used cars flood market

While manufacturers were seemingly able to control the flow of off-lease cars coming back to the market, it appears that the supply of these lower mileage, late model cars is rising fast, thanks to a sharp increase in leasing as the industry pulled itself out of one of its biggest downturns in recent history.

Recovering from a 40-percent decline in sales in the 2008-2010 timeframe, automakers not only have set records for overall sales, but, according to Manheim Auctions, leased some 12 million vehicles from 2014-2016. These 2- and 3-year old vehicles are returning to the market, which is not only supplying dealer franchises with vehicles for their Certified Pre-Owned programs, but also are spilling over to independent dealers as well. The beneficiaries are car shoppers who now have a much wider array of vehicles to choose from, but also will see a softening in prices.

Also: Class of 2018 – New Cars Ready to Roll

According to a report in Automotive News, used vehicles like late model Ford Escapes were in short supply at Reel’s Auto in Orwell, Ohio. But a recent search for an Escape within 150 miles of the store showed 668 available. “The automakers have flooded the market,” Dan Reel, owner of the used car operation, told the trade paper.

GM and Ford report that prices on used vehicles have fallen as much as 7 percent in the first quarter, fueled primarily by these off-lease vehicles.  Conventional wisdom holds that this slide in values would discourage the manufacturers from leasing, but Experian reports that lease penetration is at a record 31.44 percent. Part of the reason why the automakers are continuing to push the contracts is the fact that average transaction prices continue to rise, so that in many cases the only way to get someone into a new vehicle without a big jump in monthly payments is to lease it.

Many are leasing to buy

Falling used vehicle values could play a hand in current lessors’ desire to buy their ride once the lease is up. According to a KBB.com Quick Poll, 40 percent of the respondents who lease a car are planning to buy it and keep it when the contract is up. Another 30 percent have decided to lease or buy another car, and 19 percent are looking to return the vehicle to the dealer. Only 2 percent are looking to extend their current lease.

Of note, 9 percent say they are going to buy and resell on their own, hoping to make money. That’s not a bad strategy if you’ve driven the car less than the mileage cap on the lease. If that’s the case, you can reasonably expect to sell it for more than its market value, although it still is a bit of a gamble in a time when overall used vehicles prices are falling. 

Volvo prices XC60

Ahead of its fall launch, Volvo has announced pricing on its all-new 2018 XC60 midsize crossover SUV and is now accepting customer orders. Offered in three models, T5, T6 and T8, the XC60 comes with all-wheel drive standard and with a choice of Momentum, R-Design and Inscription trim levels. The T5 is powered by a 250-horsepower turbocharged 2.0-liter 4-cylinder engine and will start at $41,500. The T6 uses a supercharged version of the same engine to produce 316 horsepower and is priced from $44,900. The range-topping T8 Twin Engine plug-in hybrid produces 400 horsepower and begins at $52,900.

In addition to being all-wheel drive, every XC60 will come equipped with panoramic moonroof, leather seating, LED headlamps and Apple CarPlay and Android Auto integrated into a 9-inch center touchscreen.  Standard safety features include lane-keeping assist with oncoming lane mitigation that will automatically steer the car to lessen the impact of a head-on collision, as well as other features like blind-spot warning and automatic emergency braking. Options include Nappa leather interiors with ventilated and massaging seats, Bowers & Wilkins premium sound and a four-wheel air suspension system.

The rundown  

Check out the This Week in Car Buying Podcast here.

Think of it as kind of a Ford Raptor in the midsize pickup segment. The 2017 Chevrolet Colorado ZR2 shows off its chops in this First Review.

Get the lowdown on the 2017 Honda Civic, Mazda3, Chevrolet Cruze and Subaru Impreza is our latest Compact Hatchback Comparison.

BMW has released preliminary images of a camo-covered 2018 BMW M5. The super sport sedan is set to debut at the Frankfurt Motor Show in September.

In the market for a new car? Explore these useful tips on how to get the best deal:

Kelley Blue Book’s Complete Guide to Incentives

All you need to know about leasing

Which dealer services are right for you?

What to look for in your next economy car


 

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