This Week in Car Buying: Ram 1500 off to a slow start; Used compact cars cost more; Inventories tighten; Online pricing on target
The all-new 2019 Ram 1500 pickup is off to a slow start, but it’s not due to a lack of demand. The slow ramp up of vehicle production is due to some certification issues which is translating into fewer than expected units getting into the hands of consumers. So, it’s a good thing the company decided to keep the previous generation around, overlapping the launch rather than stopping production altogether.
According to Automotive News, only the 5.7-liter V8 Hemi versions of the 2019 Ram 1500 have gotten EPA certification, while final paperwork is pending on the 3.6-liter V6 engine as well as the mild hybrid 5.7-liter V8, both of which use a 48-volt belt-start generator. The trade paper speculated that engineers could still be fine turning the system before releasing it to the public as well as concerns that the EPA might be taking a closer look at the testing regimen for the new technology in the wave of the Volkswagen diesel emissions scandal.
Although 2018 models are still being sold at a good clip and standard V8 Hemi Ram 1500s are being sold, through the first five months of the year, the 189,997 units retailed are off 8.4 percent year-over-year. Ram had hoped to overtake Chevrolet Silverado with the combined volume of the old and new trucks this year, however, as of May, they trail the GM division by more than 50,000 units. Not having V6s, which account for about 20 percent of the volume, is one of the big reasons for lagging Ram sales.
Used compact cars cost more
One of the consequences of buyers favoring crossover SUVs over traditional compact cars is that fewer of the latter are being built and sold, which in turn is beginning to manifest itself in rising prices for pre-owned models. According to Mannheim Auction, a Kelley Blue Book sister company in Cox Automotive, wholesale auction prices for compact cars rose 5.7 percent in May, outpacing the performance for traditionally strong pickups and SUVs.
Part of the uptick in used compact vehicle prices is attributed to Fiat Chrysler Automobiles’ decision to end production of the Dodge Dart and Chrysler 200 sedans. This trend will only be exacerbated by Ford’s decision to drop the Fiesta and Fusion and all models of the Focus except for a wagon-like variant called the Focus Active.
Jonathan Smoke, chief economist for Cox Automotive, thinks that the auto companies may be too rash in curtailing compact car production. Consumers faced with fewer choices in the sub-$20,000 price category may have no alternative but move from the new to the used car market. That would naturally lead to more buyers bidding up the prices of the fewer compact vehicles coming back into the secondhand market. Smoke told Automotive News that “By not having the product at all, you’re limited to the pool of buyers in the new-vehicle market to be buyers who buy expensive vehicles.”
Another measure of the higher prices and desirability of these used small cars is how quickly dealers can turn over inventory. The trade paper says that over the past year, the time it takes to move a 3-year old subcompact car has fallen from 44 to 40 days, and compact cars from 39 to 36 days. The average turn time over the same period for all vehicles fell by just one day from 43 to 42 days.
Robust May sales have reduced the inventories at dealerships and as a result don’t expect too much from the summer sales events around the Independence Day holiday. Vehicle stocks dropped from 73 to 65 days’ supply from May 1 to June 1. Days’ supply is the number of days it would take to sell all the vehicles in inventory at current sales rates. A 60-day supply is considered ideal. On a year-over-year basis, the 65-day figure is down four days.
Cars are actually in tighter supply than trucks at 63 versus 66 days. Automotive News estimates that there are 3,961,800 vehicles in stock. Subaru returns to the top when it comes to the leanest inventory, followed by BMW at 44 days and Mercedes-Benz at 49 days. Fiat has the most at 145 days, followed by Jaguar with 99 and Porsche with 94.
Among the vehicles with high inventories, Buick has a 145-day supply of its Regal, Chevrolet a 134-day supply of Camaro and Ford a 111-day supply of its new EcoSport crossover. Last week’s leader in deals of the month, the Acura ILX, has seen its days’ supply cut from 71 to 47. That’s almost on par with the Honda CR-V’s 46 days and above the Civic’s 40-day supply.
Online pricing on target
A recent survey conducted by DealerRater for Automotive News found that most online shoppers found that the price they calculated was the price they were going to pay. While most shoppers in the survey, 56 percent, didn’t do the math online before visiting a dealership, of the 44 percent that did, almost two thirds said their payment was essentially the same that was quoted online. An additional 15 percent said their payment was actually less, while 13 percent paid more, but cited additional products like extended warranties or accessories that raised the price. A total of 11 percent said there were other reasons for why they paid more than quoted.
By brand, Audi received the highest positive response with 74 percent saying that their payment was essentially the price quoted online. Hyundai scored lowest with 54 percent saying their payment was what they got from online.
The results mirror a quick poll survey conducted by Kelley Blue Book in which 57 percent said they found manufacturer website pricing tools either very or somewhat useful. About 24 percent felt that the tools were not useful, while 18 percent admitted to never using one.
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