This Week in Car Buying: Top October deals; Inventories stable; Interest rate hike unlikely; Dodge Viper nears end; Small town dealers a thing of the past?
The drop in traditional sedan sales is reflected in the number of incentives, both in cash back and leases, being offered on four-door models, according to Kelley Blue Book data on the top 10 new car deals for October. Only three of the vehicles are crossovers and the other is a hybrid hatchback.
"The Ford Fusion tops the list thanks to a generous $4,000 cash back offer that makes it available for less than $20,000," said Jack R. Nerad, KBB.com executive editorial director and executive market analyst. "That's an appealing price for one of our 10 Best Sedans for under $25,000."
Other volume sedans with cash back offers include the 2015 Toyota Camry, which comes with a $1,000 rebate and 0-percent financing for 5 years and the 2015 Volkswagen Passat with $2,000 back and 60-month 0-percent financing. The two sedans have respective Kelley Blue Book Fair Purchase Prices of $21,386 and $21,869.
On the leasing side of the ledger, the 2015 Toyota Corolla is being offered for $149 per month for 36 months with $1,999 down. The full-size 2015 Kia Cadenza, which retails for $35,725, is on offer for $359 per month on a 36-month lease with no money up front. Acura's all-new 2016 ILX comes out of the gate with an attractive $229 per month lease for three years with $2,799 on an MSRP of $30,820.
Buick's two crossovers, the full-size Enclave and subcompact Encore have lease offers of $323 per month for 39 months and $159 per month for 24 months, respectively. The 2015 Enclave requires $1,823 down and the 2015 Encore, $1,839. The Encore's Chevy sibling, the 2015 Trax can be leased for 39 months for $199 per month with $1,089 down. The only hybrid on the list this month is the 2015 Toyota Prius C which offers a $1,000 rebate plus 0-percent financing for 5 years.
Inventories remain stable
Even though sales are running at blistering rates, the auto industry has done a good job in maintaining inventory, hitting the magic 60-day number for Oct. 1, according to Automotive News. That would be the number of days it would take to sell all the existing vehicles at the current sales rate and the 60-day number is considered ideal.
It's up slightly from 55 days in September 1, but down from last year's figure of 64 days.
The diesel cheating scandal at Volkswagen, however, is starting to be felt as inventory grew as a result of the stop-sale order on 2015 and 2016 diesels in stock. The VW Group's days supply climbed from 78 to 87 from Sept. 1 to Oct. 1, while the VW brand specifically saw inventory grow from 95 to 114 days month over month.
Subaru continues to run the tightest inventories in the industry, with just a 15-day supply of vehicles, while Land Rover is close behind with 16. Fiat continues to have the largest supply, with 165 days due in large part to a 225 days' supply of the slow moving Fiat 500 L. Other specific models with large sales supply include the aforementioned Acura ILX with 147; Acura RLX with 144; Chevy's subcompact Sonic with 116 and the Lincoln MKS at 114.
Interest rate hike unlikely
Reversing itself on signals sent earlier in the year to expect an interest rate increase in the 4th quarter, the Federal Reserve is now indicating that it will keep prime rates close to zero for the balance of the year over concerns of anemic economic activity. As a result, interest rates for new and used car loans are expected to remain in the current range of 4 to 5 percent for the foreseeable future.
With official inflation rates running at less than 2 percent, analysts say that the Fed will be reluctant to lift rates until it can see that wages or inflation begin to rise at a fast rate.
Dodge Viper near the end of the road
A nugget buried in the most recent agreement between Fiat Chrysler Automobiles and the United Auto Workers indicates that the Dodge Viper's days may be numbered. A product plan appended to the agreement to be voted on by the UAW membership indicates that the vehicle will go out of production at the end of the 2017 model year after 25 years in production.
According to the document, there is no planned replacement for the vehicle, which is handcrafted by 80 workers at a small assembly plant on Conner Avenue in the city of Detroit. Through Oct. 1, Dodge has sold only 49 Vipers, compared to 546 for the first 9 months in 2014.
Small town dealers a thing of the past?
If you live in a rural area, you may be finding that you're travelling a lot farther to find a new car dealer. According to Automotive News, many small towns that had as many as a dozen or so dealerships now may have only one or two or even none at all. According to the trade paper, in 1950 there were 47,000 franchised car dealers in the U.S., a number that now stands at 16,532.
Much of that decline has come from small, family owned stores in rural areas. These small dealerships have felt the squeeze from factories that insist on large, modern facilities, the lack of succession plans by longtime dealers and the inability of small dealers to find financing at competitive rates, according to the article.
Those rural dealers that do survive often find that they must service a wider geographic area, with buyers coming from as far away as 200 miles. Vince Schreivogel, who owns Vince's GM Center in Burlington, Colorado, told Automotive News "If somebody 200 miles away calls and says 'I need this done to my car', we go pick it up and leave them something to drive. It spoils the customer, but they don't go anywhere else."
With larger territories come larger sales and that economy of scale is what rural dealers will need in order to survive. "I'm not sure I'm ready to say they're going the way of the dinosaur, but there are different economies of scale," said Scott Lambert of the Minnesota Automobile Dealers Association. Since 1995, the state has seen its 550 member dealer body drop to 365.
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