This Week in Car Buying: Muscle car meltdown; Hyundai primes Elantra; Nissan's Infotainment spiff; Used-car prices firm despite glut
A decline of 8.5 percent in sales by domestic pony cars, the Chevrolet Camaro, Ford Mustang and Dodge Challenger, have some analysts wondering if that trend is a precursor to an overall market slowdown. This decline coincidentally matches the decrease in overall sedan sales, which have come largely due to the increase in crossover and SUV volume.
Among the three models, the hardest hit, however, is the Chevrolet Camaro, at 15.4 percent, compared to the 5.5 percent drops for both the Mustang and Challenger. It’s an interesting development in that the 2016 Camaro, which had a complete makeover when it was shifted from its Zeta-platform built in Canada to its new U.S.-sourced Alpha platform, is the newest of the trio. One of the factors might be that the car looks too similar than the one it replaced, while the 2015 styling change in the Mustang was much more dramatic.
However, Eric Ibara, director of residual value consulting at Kelley Blue Book, attributes the difference in sales in incentive spending by the manufacturers and GM’s desire to cut fleet sales in favor of higher margin retail sales. “The Mustang was redesigned in 2015 and sales are only down 5.5-percent year-to-date, but incentive spending (according to Autodata) is up nearly $500 per unit compared to the same time last year. On the other hand, the Camaro is redesigned for 2016 and while its sales are down the most, its incentive spending is also down by nearly $500 per unit and although it is too soon to tell, it appears that its rental volume will be down in 2016 compared to the previous year.”
He adds that Mustang rental volume appears to be running at the same levels as last year. As for the Challenger, “It appears to be doing well, down only 4.6-percent year-to-date,” Ibara observed. “However, its incentives are up by about $750 per unit and it now has the highest incentives of the three pony cars. In addition, Challenger’s rental volume has soared for the 2016 model year.”
Ibara says that all three cars are holding their values remarkably well, with 36-month residuals at 48 to 49 percent of MSRP. While convertibles may be desirable by top-down motoring enthusiasts, they tend to drag resale down because of their high numbers in rental fleets—they typically return 10 points less than coupes, Ibara said, noting this risk factor for Mustang and Camaro. Early indications are that “from a residual value perspective, the Camaro appears to be headed in the right direction, Mustang is neutral and Challenger is on the ‘watch’ list.”
While the slowdown in pony car sales may or may not be an early sign of a general market downturn, their sales performance reflects the differing overall strategies GM, Ford and Chrysler are pursuing. GM is looking to focus on profitability by reining in incentives and fleet sales (meaning fewer deals for bargain hunters), Ford prefers to use a mix of both incentives and fleets sales to keep the momentum rolling, while FCA is all-in on high incentives and increasing fleet sales to keep volume and share up.
Hyundai “Primes” Elantra
Looking to give a boost to the 2017 Hyundai Elantra, the Korean automaker has introduced a pilot program through Amazon Prime that enables users to schedule test drives of the compact in the Los Angeles/Orange County area. Called “Prime Now. Drive Now.”, the campaign allows prospects to schedule Elantra test drives at the location of their choosing over the last two weekends of August. The 45-60 minute test drives involves a trained expert who will bring the car to the desired place and will accompany the participant on the drive to answer questions and demonstrate the Elantra’s features.
“With the all-new Elantra and Elantra Eco in dealerships now, we are excited to be the first to team up with Amazon to give customers a tailored test-drive experience,” said Dean Evans, chief marketing officer for Hyundai Motor America. “We know people are looking for a new way to experience our vehicles and with the convenience of Amazon’s Prime Now service, 'Prime Now. Drive Now.' is an innovative solution we are testing to modernize today’s automotive shopping experience.”
Nissan infotainment spiff
Not all incentives take the form of a cash rebates or lease deals as Nissan demonstrates by giving customers purchasing select 2017 models multi-year subscriptions to Sirius XM Traffic and Sirius XM Travel Link. Vehicles equipped with navigation will get a 3-year subscription to both services, while vehicles without navigation will get a 3-year subscription to Sirius XM Travel Link, which includes real-time delivery of weather, fuel price, sports scores and stock information.
Currently, buyers of any new Nissan vehicle equipped with satellite radio receive a 3-month subscription to Sirius XM’s All Access audio package.
Used car prices firm despite glut
As the supply of off-lease cars grow in the used vehicle market, the expected laws of supply and demand don’t seem to be working, at least just yet. The Manheim Used Vehicle Index rose for the fourth straight month to 127.0, its highest level since 2011 when the index stood at 127.5. A year ago, it was nearly three points lower at 124.1. (Manheim Auctions, which compiles the index, is part of Cox Automotive along with Kelley Blue Book).
So why aren’t prices dropping? Factors analysts cite include the strong demand for used pickups and the higher mix of low mileage, late model cars which tends to pull up average prices. While the rising supply of used cars will eventually cause prices to drop, the other factor that may undercut the index will be higher incentives on new cars, which are beginning to kick in as automakers look to clear out the stocks of 2016 models in advance of the new model year.
Some 3.1 million off-lease cars are expected to hit the market this year, up from 2.3 million a year ago. Manufacturers are trying to manage the glut of off-lease cars by holding some off the market and slowly re-introducing this inventory through Certified Pre-Owned (CPO) programs at their franchised dealers.
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