This Week in Car Buying: Sales drop, incentives rise; Transaction prices peaked; Financing moves online; Mercedes-AMG prices GT R
Despite a big push on incentives, vehicles sales dropped on a year-over-year basis for March, leading to some predictions that total sales may not top the 17-million mark, something the industry has been able to do for the past three years. The drop in sales of nearly 2 percent affected nearly all brands; but among the major makes, Nissan and General Motors posted sales increases.
Trucks remain strong, actually growing 5.4 percent in March, but sedans continue to lose favor with buyers, dropping 11 percent in the month and contributing the most to the downturn in overall volume. The growth in sales at GM and Nissan were attributed primarily to aggressive incentive programs. GM sales ticked up by 1.6 percent, but the company’s incentive spending grew by 21 percent. Nissan posted a 3.2 percent sales increase, but its incentive spend was also up by 18 percent.
Even companies that have seen strong sales and low inventories, like Subaru, are beginning to feel the pinch. Reports indicate that Subaru’s incentive spending has increased by 60 percent in March, according to Autodata to an average of $907 per car sold. That’s still well below the industry average reported by J.D. Power, which estimates that makers are in aggregate, spending $3,777 on each car sold. While Subaru may be spending more, it shies away from across-the-board cash rebates in favor of locally targeted incentives usually tied to lease deals and 0-percent financing. The entry level 2017 Legacy can be leased for $175 per month for 3 years with $2,585 down or purchased with 0-percent financing. The all-new 2017 Subaru Impreza is also being offered on a 3-year lease for $165 per month with $1,885 down. However, the low-interest financing on that vehicle starts at 1.9 percent.
If Subaru, which still has some of the leanest inventories in the industry, is beginning to ramp up incentive spending, then it’s likely that the other brands, looking to keep up their sales momentum, will probably launch rather generous incentive programs if sales continue to be soft through the spring selling season. Smart shoppers who don’t have their hearts set on a truck or midsize crossover SUV will likely find their best deals among sedans in all size classes, entry level economy cars and hybrids.
Transaction prices peaked
Although average transaction prices (ATP) posted a year-over-year gain of nearly 2 percent in March, they continue to slide from record highs posted earlier in the year. The light vehicle ATP for March was $34,342, up $587 over last year, but down $133 from February figures. Incentive spending is also taking a toll on the ATP with some traditionally strong categories, like full-size pickups, seeing a decrease.
“New-car prices are up yet again by just under 2 percent, which is a slightly lower increase than in the first two months of the year,” said Tim Fleming, an analyst for Kelley Blue Book. “While numbers for automakers are mostly flat to slightly positive, there are signs of weakness in some popular vehicle segments. Perhaps most notably, the full-size truck segment is down 2 percent year-over-year, a rare occurrence for this category which has seen large price improvements over the last few years. Also transaction prices for subcompact SUVs, one of last year’s hottest segments, are down 3 percent, due to slowing consumer demand for new vehicles and high levels of inventory available.”
Nissan posted a 5 percent increase in ATP, helped in large part by continued strength of the Rogue crossover SUV and the redesigned full-size Armada, which saw its average transaction value increase by 18 percent over the previous model. Among luxury makes, Audi had a similar 5 percent growth in ATP thanks to the Audi A4, which is up 7 percent and the A4 Allroad, which is up 11 percent.
The biggest decline in ATP among segments came in the EV category, which saw prices drop by 12.2 percent in March. Minivans were the strongest, growing 2.8 percent, largely the result of the all-new Chrysler Pacifica.
In addition to incentives beginning to put pressure on higher average new-vehicle prices, the used market is expected to have an impact. As the value of late-model vehicles begins to decline as a result of a glut of off-lease models returning to the market, buyers may opt for these pre-owned units instead of new vehicles. Morgan Stanley is projecting that used-vehicle values could remain flat or in more bearish scenarios drop anywhere from 20 to 50 percent over the next four years.
Financing moves online
One of the major lenders in the automotive space, Ally (which grew out of General Motor Acceptance Corp. during GM’s bankruptcy), is creating an online exchange for vehicle financing called Clearlane. The new marketplace is the result of the firm’s acquisition last fall of BlueYield. In addition to arranging loans through Ally, Clearlane offers finance options from more than a dozen national, regional and local finance companies.
Ally will also offer other finance and insurance products on the new exchange. While not looking to replace the current model that includes dealers, finance companies and customers in the transaction, the idea behind the new service is to provide a wider range of options to car shoppers. Part of the intent is to also streamline the transaction process by qualifying and setting up consumer financing, primarily online before the deal is closed.
Mercedes-AMG prices the GT R
If you think average transaction prices are high, hold onto your hats. Mercedes-AMG has priced the 2018 AMG GT R Coupe, which arrives at dealerships this summer. The 577-horsepower sports car will start at $157,000. Of course, $995 delivery is extra. The convertible version of the car, the GT C Roadster is similarly priced. The least expensive GT Coupe, the entry level model if you will, begins at $112,400, while the GT Roadster is $124,400. On the coupe side, two other models in the lineup are the AMG GT S at $132,400 and the GT C Coupe at $145,000. All prices exclude delivery.
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