This Week in Car Buying: Long loans? Honda says not so fast; Long wait for BMW i8; Hot Trax; Cadillac boutiques?
Last week saw Reid Bigland, head of Chrysler Group's North America sales indicate that longer loans will become the norm as stickers and transaction prices continue to climb. He foresees not only more 84-month loans, but also 8-year terms (96 months) in order to keep monthly payments in check. But his view was quickly countered by American Honda's sales chief, John Mendel, who told Bloomberg that the longer terms are "stupid, not just for us, but the industry." He added that Honda will be staying away from these extended contracts even as it looks to boost sales in 2015. "You're ringing the bell on a new-car sale, but that customer is saddled -- they're stretched so thin," Mendel said. Critics of the long term loans say that they keep repeat new car buyers out of the market for extended periods, while other studies have shown that the long loans also tend to reduce brand loyalty.
BMW i8: The wait is on
As the average price of fuel has dropped to just over $2 per gallon for regular nationally and sales of EVs and hybrids begin to feel the effects of cheap gas, there's one vehicle that remains relatively hard to get and it doesn't begin with the letter T. BMW's plug-in hybrid i8 sports car remains a hot commodity even though the North American unit of the German automaker will see its annual allotment double to 1,000 cars this year, according to Automotive News. A BMW exec says that the wait for the $137,450 two-seater is about a year.
BWM CEO Ludwig Willisch told the trade paper that the i8 is the perfect halo car because it "stands for all the technology BMW has to offer and has 72-mpg mileage." The i3 electric compact is expected to sell about 1,000 units per year and Willisch believes falling gas prices won't have a huge impact on the market for this all-new vehicle.
Speaking of cars attracting a lot of interest, the 2015 Chevrolet Trax, which is decidedly at the other end of the scale when compared to the BMW i8 tops the list of Kelley Blue Book Hot Cars for January 22. The new model has seen interest by shoppers on kbb.com increase nearly 200 percent over the past week. According to KBB analyst Akshay Anand, "The Chevy Trax keeps gaining steam in what is set to be a very busy year for the brand. With a whopping five model launches/redesigns in the 2015 calendar year, Chevy is a brand to watch out for in terms of gaining market share as long as it keeps putting strong product into the marketplace."
In other segments, even though the 2015 Lexus RX is in the last year of the current generation, it remains the dominant SUV/CUV in the luxury landscape. Close on its heels is the all-new Lexus NX in the compact crossover SUV category, one of the fastest growing segments in the industry.
Cadillac to embrace boutique showrooms
Looking to differentiate itself from its past image and more closely align itself with high-end European luxury makes, Cadillac will be embarking on a program to convert showrooms currently coupled with other makes to have more of a boutique vibe to them than the traditional store.
Cadillac has about 900 dealers nationally, including 200 flagship standalone operations, while the rest are paired with other makes. It's those 700 dual operations that will be the primary focus of the boutique approach. According to Cadillac president Johann de Nysschen, the idea behind the move is "for all dealers, including multi-brand outlets, [to] strive to create a premium showroom atmosphere and the sophisticated brand experience that luxury consumers expect."
He outlined a plan to bring emerging technology to the showroom experience. "Virtual Showroom" systems could enable shoppers to quickly configure and envision multiple models, color and interior choices using interactive digital displays, or potentially even holograms. He also said Cadillac will develop new systems to incentivize and support customer satisfaction performance and dealer compensation. The boutique concept would feature exclusive Cadillac consumer touch points, highly trained sales and service staff and luxury amenities.
Inventories thin out
Automotive News reports that the strong sales finish to the 2014 calendar year has adjusted dealer inventories to move them in line with normal supply of about 60 days-that is it would take two months to sell all the cars on dealer lots at the current sales pace. Among the makes with the tightest supplies are Land Rover at 16, Subaru at 20, followed by BMW with 26 days of inventory on hand. Among those with the most cars on dealer lots are Fiat at 127 days' supply followed by Lincoln with 111 days and Mitsubishi at 110. Of particular note, Lincoln has 10,900 2014 and 2015 model MKX crossover SUVs on hand or a 170 day supply. With an all-new 2016 MKX on the way later this year, it's likely that there will be new cash incentive programs coming soon in addition to the current subsidized loan programs in order to move out current stocks.