This Week in Car Buying: Trucks drive sales, prices higher; Jeep eyes subscriptions; Loans, payments hit high; A Bugatti you can afford
Strong demand for trucks, crossovers and SUVs helped lift May sales and are also driving average transaction prices higher. Led by strong Jeep sales at FCA and smaller gains at Ford, Honda and the VW brand, U.S. new-vehicle sales are on track to rise in May behind robust light-truck demand. The industry is expected to post about a 3 percent increase in sales over May of last year, fueled in large part by strong sales of redesigned trucks and SUVs.
Fiat Chrysler Automobiles said its volume was up 11 percent over last year because of the launches of the all-new 2018 Jeep Wrangler and 2019 Ram 1500 pickup truck. Also contributing to its strong results was a greater mix of retail sales and lower fleet deliveries. Jeep posted a 29-percent bump up in sales, and retailed a May record of 92,287 units. Ram sales were up by 4 percent, but the company is also expecting robust sales through the summer as production of the redesigned truck ramps up.
Ford was also up marginally in May, seeing sales increase by only 0.5 percent. The company said lower car sales were offset by higher truck volume. Other makes posting gains, like Volkswagen, which saw a 4 percent rise in sales, attributed new crossover SUV models like the Atlas and redesigned Tiguan for its gains. Mazda said it also had a 15-percent bump thanks to strong demand for its crossovers. Honda reported a 3.1 percent increase in sales, its 2.7-percent decrease in car volume countered by a 9.1 percent climb in truck deliveries.
Slack demand for traditional cars affected Toyota and Nissan, which saw respective declines in sales of 1.5 percent and 3.8 percent. Nissan expected the result by pulling back on incentives and lowering fleet shipments as it looks to make a strong retail push with its all-new 2019 Altima in the coming months.
Truck demand is also pushing up vehicle average transaction prices, which climbed 3.4 percent in May to $35,635, an increase of $1,187. While higher than a year ago (which also may reflect lower incentives during the traditional Memorial Day sales events), ATP actually fell month-over-month by $145.
“Average transaction prices rose a healthy 3 percent this month and remain strong even as new-vehicle demand is expected to falter in 2018,” said Tim Fleming, analyst for Kelley Blue Book. “It’s no surprise prices were helped by SUV demand, but pickup trucks played a big role in May’s increases as well. Prices in both full-size and mid-size truck segments were up 4 percent, and it is shaping up to be a pivotal time for pickups with the new Ram truck now on the market, a new Chevrolet Silverado coming later in the year, and the Ford Ranger returning to the U.S. early next year.”
Jeep eyes subscriptions
FCA’s Jeep division is looking to expand options for consumers who want to get behind the wheel of its products. During a corporate overview program for financial analysts, FCA announced Jeep Wave, which would not only look at attracting new customers with subscription services, but also give buyers an opportunity to have access to other FCA vehicles.
Jeep is going to test a program next year in the Northeast where buyers of Wranglers and Trail Hawk trim level models will get coins when they make their purchase. They can later use this currency to borrow other products and can buy more coins if they want to continue to use other FCA vehicles. Also in 2019, Jeep will be testing a subscription program with tiered pricing depending on vehicle. The service will also include options for insurance coverage, a selection of vehicles to use and concierge services.
Loans, payments hit high
Average loan amounts and monthly payments have hit a record high, according to Experian, which released the results in a State of the Automotive Finance report. The company said that the average loan amount has risen 3 percent in the first quarter to $31,455, which is up a total of $921 over the previous year.
Experian said that the average monthly payment now stands at $523 per month, an increase of $15 in the first quarter of 2018. In addition to higher monthly payments, the terms of the loans themselves are getting longer. The report said the average new vehicle loan is now 69 months, up from 68.5 last year.
However, while loans are getting more expensive and longer, the share of subprime lending is dropping. Experian said that new loans to lenders with less than ideal credit histories dropped 8.4 percent and for deep subprime borrowers it was down 14.1 percent.
A Bugatti even you can afford
If you have a spare million or three, perhaps you could afford a Bugatti Chiron. But for the rest of us, we might be able to put the new Lego Technic Bugatti Chiron on our shopping list. The 1:8 scale Bugatti replica measure over 22 inches long and has 3,599 pieces including moving features like a rear aerodynamic wing, paddle gearshifts and pistons that go up and down in the W16 engine. And true to the spirit of the original, each model has its own unique serial number, a speed key which allows you to switch the rear wing from handling to top speed, and a small Bugatti overnight bag that stows under the hood.
The Lego Bugatti also comes in an exclusive box with a coffee table style collector booklet with the comprehensive building instructions. The suggested retail price tag for the Lego Technic Bugatti Chiron, which went on sale June 1, is $349.99. Like the original, don’t expect any incentives from the manufacturer.
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