This Week in Car Buying: March sales sizzle; First-time buyers get schooled; Teslamania spurs hybrid, EV interest; Infiniti and Cadillac boost pre-owned activity
Contrary to conventional wisdom that new car sales have plateaued, March results show that the market is still hot, with an expected 8-percent increase in sales for the best monthly sales result that the industry has seen in 10 years, according to Kelley Blue Book data. The figures predict a 1.66 million unit tally for March, which translates to a 17.2 million seasonally adjusted annual rate. Contributing to the strength of the numbers is the fact that there were two additional selling days during the period.
“The industry continues to maintain its momentum in March as we expect the highest volume of any month in more than 10 years,” said Tim Fleming, analyst for Kelley Blue Book. “However, we continue to follow indicators that demand for new cars in weakening, while there is increased incentive spending and an increasing share of fleet sales.”
That pessimism is reflected in a poll of car dealers ahead of their annual National Automotive Dealers Association convention in Las Vegas. According to an online survey conducted by Automotive News, only one in 10 dealers remain strongly optimistic about prospects for continued sales gains in 2016 at their individual stores, while 14 percent expect sales to be worse. The biggest number, 38 percent, expect things to be better, while 37 percent feel sales will be about the same. The paper said by adding those who expect things to be better or much better together nets 49 percent of the respondents, compared to 71 percent a year ago.
Still, a strong March will see first quarter sales advance by 5 percent over last year, although retail sales penetration has fallen slightly from 77.2 to 76.1 percent as automakers ramp up fleet sales. Among the expected big gainers are Fiat Chrysler Automobiles, up 14 percent largely on strong Jeep sales, and American Honda, which will experience double-digit gains thanks to the new HR-V and Pilot. The latter is one of the hottest vehicles on the market with just an 18-day dealer inventory supply.
Crossover SUVs and trucks continue to be big sellers. “Smaller utility vehicles continue to outpace the rest of the industry, as the most popular segment is now averaging 20 percent growth this year,” Fleming said. “Mainstay models like the Toyota RAV4 and Honda CR-V still sit atop the segment, while new models like the Jeep Renegade and Honda HR-V are gaining popularity with consumers by demonstrating their values as more affordable, but still versatile, small crossovers.”
Full-size trucks are also up, but incentives on these vehicles are beginning to climb, topping $4,000 average per unit.
Schooling the first time buyer
Previously we reported on a survey that showed nearly 60-percent of college-age students have little or no knowledge of how credit works. One used-car dealership in Michigan is taking a proactive approach by teaming up with a local credit union to offer instruction on auto financing for young, first time buyers, according to Automotive News.
“We used to always have young adults come in without a co-signer or without a sizable down payment and in those cases, all we could offer were these unfavorable interest rates,” Chris Babcock, sales finance manager of Viels Auto Sales in Lapeer, Mich., told the trade paper. “We were just setting them up to fail.” But now, Viels has a First Time Auto Buyers Program in which Babcock conducts a buyer’s training program that can be taken either online or in a formal class setting.
By taking the program and meeting five underwriting requirements of the participating credit union, Team One, those who complete the course usually qualify for low-interest rate loans. Since starting the program last September, Babcock said there have been zero delinquencies among the graduates who have taken out loans. Once the 18- to 24-month pilot program is completed, Team One Credit Union is looking at rolling the program out to other dealers in the area.
Teslamania sparks hybrid/EV interest
The hype surrounding the unveiling of the Tesla Model 3, which saw nearly 20,000 people lining up at the EV maker’s dealerships to get their $1,000 deposits down on a car that won’t ship until next year may be sparking interest in other alternative power vehicles. According to the Kelley Hot Car Report, online interest in the 2016 Chevrolet Volt has soared 276.4 percent in the week leading up to the Tesla reveal. Dhara Mehta, senior analyst at Kelley Blue Book Strategic Insights, said among the reasons for the increased consideration is that the “second-generation Volt also offers a 53-mile all-electric range and a total range of 420 miles, an almost 30 percent improvement from the previous generation.”
Tesla’s nearest rival to the Model 3 will likely be the Chevrolet Bolt EV, which will be launched later this year offering a 200 mile range and a purchase price of around $30,000 after a $7,500 federal tax credit. “It will be interesting to see if Chevrolet succeeds in creating a distinct advantage for each model in shoppers’ minds,” Mehta concluded.
Infiniti, Cadillac step up pre-owned plans
Both Infiniti and Cadillac have plans to step up their efforts in marketing Certified Pre-Owned vehicles, as a record number of lease returns are expected during 2016. Infiniti is said to be working on a program of new extended warranties, the availability of more vehicles and more advertising of the program, John Fabre, head of the Infiniti National Dealer Advisory Board told Automotive News. “We will have more cars eligible for CPO warranty certification,” he said, adding, “It covers more mileage and more months.”
Meanwhile, Cadillac will be using its CPO program to provide a framework of dealer incentive as part of a program called Project Pinnacle. It rewards dealers with bonus money if the CPO sales hit 20 percent of what they do on retail vehicle deliveries. The bonuses go up if that number grows to 30 percent. As a result, expect dealers to be more aggressive in marketing CPO Cadillacs in the coming months.
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