This Week in Car Buying: Orphan cars ripe for adoption; Sales slowdown; Transaction prices still hold up; Ram 1500 diesel back on
This week’s announcement that Hyundai will cease Azera exports to the U.S. is a case where one door closing opens up another. Shoppers looking for a deal may want to consider an orphan like the Azera, although right now incentives are better on 2016 models (rebates of up to $4,500) versus the $1,000 and 0 to 3.9 percent financing you can find on the current 2017 closeout models.
Most of these orphans are on the car side of the ledger, with the last of models like the Chrysler 200, Dodge Dart, Buick Verano, Lincoln MKS no longer in production. If they’re found in dealer inventories, there’s likely to be big discounts on them. Compact sedan sales are down 32 percent over year ago levels. While there may be big discounts, these orphan cars are likely to depreciate faster than a model still in production, with price increases on the current models helping to pull up the resale value of the older models. With no new versions flying top cover, the best play for these end-of-the-line units is to negotiate the lowest possible price and keep the vehicle for a long time.
A variation on this theme is to watch those models being replaced by a completely new generation vehicle. Sometimes the manufacturer will keep the old model in production while it ramps up output of the new model. A case in point is the 2017 Volkswagen Tiguan Limited, which is the current German-built 2-row variant that has had some content stripped out of it and is priced as an entry level model. The new 3-row 2018 Tiguan, which is being built in Mexico, has been launched and is priced higher. If you don’t need the 3rd row, but want a current version that won’t depreciate as quickly, then the Limited should be on your list.
Fiat Chrysler Automobiles will be employing a similar strategy when a new Ram pickup bows next year as a 2019 model. The current Ram will continue in production for the good part of another model year and perhaps longer if sales warrant it. Likewise with the all-new Jeep Wrangler, the existing model will continue to be built as Jeep ramps up its newer, longer replacement that will also include a pickup version.
New vehicle sales for June slid 2.9-percent over year earlier levels, leading industry analysts to predict that sales may fall to 16.8 million for the year, the first time in three years that volumes will not surpass the 17 million mark. For the first half, overall sales declined 2.1 percent over year ago levels, but despite the decline, there’s no widespread expectation that the ebbing sales will leaded to a massive downturn that rocked the industry a decade ago.
“Following record sales of 17.5 million units in 2016, the seventh consecutive year of sales increases, we expect sales to decline 1 to 4 percent this year, in the range of 16.8 to 17.3 million units,” said Tim Fleming, a Kelley Blue Book analyst. “Leasing, which has grown more popular in recent years, appears to be plateauing at around 32 percent of retail sales.”
Incentive spending has climbed with J.D. Power reporting a June new-car incentive average of $3,955, which is up $249, while trucks averaged $3,494, up $350. Still, manufacturers are showing restraint, trimming production and scaling back fleet sales to protect their margins. GM in particular, which saw sales decline 6.4 percent in June, also shipped 11,000 fewer vehicles to daily rental fleets last month over year earlier levels for a 54-percent decline in that fleet activity. For the month, Ford was off 3.8 percent, while FCA was down 6.7 percent overall.
Among those seeing increases were large Japanese makes, Toyota and Nissan, both of which were up 2 percent each, while Honda sales grew year-over-year by 0.8 percent. Subaru continues to be on a record pace seeing its June sales increase by 12 percent and Volkswagen saw a 15-percent boost in volume.
Transaction prices still hold up
Slower sales and higher incentives have yet to put a huge dent in transaction prices as Kelley Blue Book data show the June average of $34,442 was up 1.5 percent or $511 from last year. However, the month-over-month trend shows that they have hit a plateau with prices actually falling 0.1 percent.
“Transaction prices grew more slowly than normal in June, increasing less than 2 percent,” said KBB analyst Tim Fleming. “As the industry enters a ‘post-peak’ environment for new-car sales, more pressure will be placed on transaction prices. Kelley Blue book is seeing more mixed results among manufacturers and popular segments such as full-size trucks and midsize cars, both of which are flat, as well as compact SUVs, which rose 1 percent. These trends are likely to continue as retail sales weaken.”
By manufacturer, Nissan showed the biggest gain of 6 percent year-over-year thanks to a greater share of higher margin crossover SUVs in its sales mix, as well as the introduction of the new Armada, which had a 19-percent gain in ATP. FCA also saw a 5.6 percent increase in transaction prices. In addition to a strong performance from Ram trucks, the introduction of the Alfa Romeo Giulia, which commands MSRPs ranging from $40,000 to $75,000, also contributed to the increase.
Ram 1500 diesel back on
Although Ram hasn’t gotten final certification yet, the FCA division must be confident that it has resolved issues with the EPA since it is beginning to resume production of the Ram 1500 diesel. Automotive News reports that workers at the Ram assembly plant in Warren, Mich., have told the trade paper that about two dozen 2017 models of the truck are being made per shift. Ram had stopped building the truck last year when the EPA pulled certification while it looked into the emissions control system software of 2016 models equipped with the 3.0-liter V6 diesel.
Nissan announced that it will take the wraps off its all-new 2018 Leaf EV on Sept. 6. The revamped electric promises a more conventional look and longer range.
A new flagship is coming our way in the form of the 2019 Audi A8. The German automaker will reveal its top-end luxury sedan next week.
If you lease, your next car could be the one you’re already driving. See these tips on buying a vehicle at the end of your contract.
In the market for a new car? Explore these useful tips on how to get the best deal: