This Week in Car Buying: Used car prices drop; Loan terms at the limit; Chrysler 200 hiatus extended, Pacifica priced; Honda launches Civic Coupe
As manufacturers continue to push up new car sales, softening prices for used vehicles could undercut their efforts to sustain the current market pace. According to Manheim Auctions, average used vehicle prices fell last month by 1.5 percent over a year ago level and 2 percent from a month earlier. The average wholesale price for used cars was $10,345.
Tom Webb, chief economist for Cox Automotive (which owns Manheim and Kelley Blue Book), told the Wall Street Journal that “We expect pricing to fall over the next two years as much more supply [comes] in as vehicles come off lease.”
Much of the decline in used vehicle values is being felt in the sedan segments, with full-size 4-door models dropping 20 percent, compact cars 10 percent and more mainstream family cars 2 percent. With gas prices dipping to new lows, used vehicle prices on pickup trucks climbed 7.45 percent to an average of $16,125. Pickups have remained above the $16,000 level since last September.
Lower used vehicle prices puts pressure on new vehicle sales by making the step up from used to new larger. That in turn could fuel more incentives and erode margins as the supply of unsold new cars grows putting pressure on manufacturers to offer more incentives.
One of the side effects already occurring is an increase in fleet sales as manufacturers look to find outlets to compensate for declining retail volume. According to Automotive News, Ford and Fiat Chrysler had their best February since 2006 and Nissan posted its highest market share ever, all three reaching these milestones thanks to respective boosts in fleet sales of 42, 39 and 54 percent. GM, by contrast, saw its share drop by 1.5 percent overall on a 24-percent decline in fleet shipments.
Loans at the limit
High average transaction prices usually lead to higher loan balances, something that consumers look to make more manageable by extending the length of the loans to keep the monthly payments in check. However, Experian Automotive is saying that loan terms hitting six or seven years (72 or 84 months) may be as far as lenders will be willing to go when extending credit. The company said that terms of 73 to 84 months made up 29 percent of new-vehicle loans in the last quarter of 2015.
Melinda Zabritski, Experian’s senior director of financial solutions told Automotive News that at some point “there will be a cap on term.” As for loans longer than 84 months, she added “There are a few, but they are rare.”
While the lower monthly payments of a long-term loan may look tempting, it’s important to keep in mind the longer the period, the more in total interest buyers will be paying. And if the vehicle depreciates more quickly than the repayment schedule, owners can find themselves upside down in the loan, owing more than they could get either by trading the car in or selling it to another party.
Chrysler 200 production pause, Pacifica priced
The shutdown of the Sterling Heights, Mich. assembly plant that produces the 2016 Chrysler 200 has been extended by three more weeks. Production is now slated to resume April 4 for the slow-selling midsize sedan. Sales plunged 61 percent when Chrysler dropped the 200 from a dealer incentive plan. Inventory stands at 147 days for the car, well above the industry norm of 60 days’ supply. Chrysler is currently offering rebates ranging from $500 to $2,500 on the 200.
Fiat Chrysler Automobile Chairman Sergio Marchionne has said that the company may eventually end production of the 200 and compact Dodge Dart due to slumping sales, but is currently looking for outside partners to continue production of the vehicles, perhaps on shared platforms. The two sedans have fared poorly in a market that is shifting from the traditional body style to crossover SUVs.
Meanwhile, Chrysler has announced pricing for the 2017 Pacifica minivan, which replaces the 2016 Town & Country in the lineup. The starting point is $28,595 for the base LX, a price the company says is lower than its rivals. The minivan will be offered in five trim levels, LX, Touring, Touring-L, Touring-L Plus and Limited. Touring starts at $30,495, the Touring-L at $34,495 and the Touring-L Plus at $37,895. The range topping limited has an MSRP of $42,494. Destination is an additional $995.
As Chrysler begins to ramp up sales of its new Pacifica, it currently is offering rebates of $500 to $3,000 plus 0- to 3.9-percent financing on 2016 Town & Country models in stock.
Honda Civic Coupe launched
The 2016 Honda Civic Coupe goes on sale next week and will start at $19,050 for the base LX model equipped with a 2.0-liter 4-cylinder engine and 6-speed manual transmission. The LX and LX-P models, which have the same engine mated to a CVT, are priced at $19,850 and $20,850 respectively. The EX, EX-L and top line Touring models are equipped with a turbocharged 1.5-liter 4-cylinder engine with a CVT. The EX starts at $22,300, the EX-L at $23,425 and the Touring is $26,125. Destination is $835 extra.
“This new Civic Coupe exemplifies Honda’s focus on fun-to-drive character with two powerful engine options and a chassis tuned specifically for driving fun,” said Jeff Conrad, senior vice president and general manager for the Honda Division. “As the second model in our sportiest and most ambitious Civic lineup ever, the coupe sets the bar for performance, refinement and connectivity in the compact coupe segment.” See our most recent quick take on the 2016 Honda Civic LX sedan.
To mark that occasion of the golden anniversary of its entry into the pony car market, Chevy has taken the wraps off the 2017 Chevrolet Camaro 50th Anniversary Edition. This commemorative model will go on sale this summer.
Porsche is looking to expand its lineup of SUVs by offering a new entry level version in the form of the 2017 Porsche Macan, a base model positioned beneath the Macan S that’s powered by a turbocharged 4-cylinder engine.