This Week in Car Buying: Compact SUV incentives spike; Buick car count drops; Amazon pumps up Rivian; Loan delinquencies climb
Booming sales of crossover SUVs at the expense of cars also carries an additional cost in the form of higher incentives, as both the number of models and increasing output put pressure on makers to move the iron.
As compact models like the Toyota RAV4, Nissan Rogue and Honda CR-V top 400,000 units annually each, analysts note that not only has the average spiffs on the Toyota and Nissan models continued to rise, Honda, which is usually averse to such spending, has been forced to respond in kind.
According to Automotive News, Toyota spent almost $3,000 per RAV4 last year, while Nissan had incentives closer to $4,000 on average for the Rogue. Honda, which offered as little as $848 per unit on CR-V, has seen its incentive spend grow to $2,200 per sale.
Those incentives helped fuel a 20-percent bump in CR-V sales in January as Honda looked to counter to the RAV4’s momentum from its recent redesign. Still, don’t look for the sweet deals to last much longer. A Honda spokesperson told the trade paper that the higher incentives were used to move out existing 2018 models and that the offers would not be as generous on 2019 versions. “The plan moving forward for 2019 is to remain conservative with our incentives,” she said.
It will be interesting to see if Toyota and Nissan follow Honda’s lead in backing off incentives in this hot segment. Nissan has promised that it would not only try to rein in rebates, but also cut back on fleet and daily rental volume to boost margins and give a lift to resale values. So far, though, they haven’t. Last year’s average incentive on Rogue was $3,912, down from 2017’s $3,966 per unit.
Toyota bears watching. While incentives were generous on RAV4, much of that money was aimed at the previous generation 2018 models. Currently, Toyota has $1,000 cash back on the 2019 RAV4 only if you take out a loan through Toyota Financial Services at current market rates. There is a $299 per month lease deal for 3- years with $1,999 due at signing. The 2018 RAV4 is eligible for $1,250 cash back or a $239 per month lease for 3 years with $1,999 down.
Buick’s car count falls
Earlier this year there were reports that Opel, which was sold by GM to France’s PSA Group, would no longer be building the Cascada convertible as it makes changes to the plant in Poland producing the car. Buick declined to confirm the future of the car at the time, but now has instructed dealers that they should place their final orders since Cascada production will end this summer.
With the impending demise of the LaCrosse full-size sedan, Buick will have only one car, the Regal, which is offered in a liftback sedan and crossover wagon body styles. Cascada was unique in the market since it was an affordable 4-passenger convertible with decent rear seat accommodation. The only other convertibles that start in the same low $30,000 price range are the Ford Mustang and Chevrolet Camaro. Chrysler stopped producing the 200 Convertible several years ago.
Last year, Buick sold only 4,136 Cascada convertibles. The 2019 model starts at $33,065 plus $925 delivery.
Amazon pumps up Rivian
Rumors were swirling that EV startup Rivian was about to take on investments from GM and Amazon, however, when the dust settled it turned out the only player was the on-line giant to the tune of $700 million. GM, which had said it is looking at building an EV pickup, was not interested in joining the party.
But the infusion of cash is a sign that there are deep pockets taking Rivian seriously. The company presented an all-electric pickup, the R1T pickup and R1S SUV, at the Los Angeles Auto Show last fall and is promising to be in market with 2021 model year vehicles.
Part of the rationale for Amazon’s investment is the potential for Rivian to produce electric delivery vans for the company. But even more intriguing could be using Amazon’s resources to come up with a new way to sell and service vehicles, a move that would have implications far beyond what Tesla has been able to accomplish with its factory owned stores.
For now, Rivian in concentrating on ramping up its assembly plant in the old Mitsubishi facility in Bloomington, Ill., as well as taking $1,000 deposits for the electric pickup and SUV that will cost somewhere north of $60,000.
Loan delinquencies climb
Contrary to earlier reports that indicated that delinquencies on auto loans were pretty much in line with historical trends, a new report from the New York branch of the Federal Reserve System said that late payments climbed during the 4th quarter of last year to levels not seen since 2012.
The New York Fed reported that the 90-day delinquency rate on auto loans was running at 4.47 percent of overall balances. That number represents 7 million borrowers who were in arrears. The percentage was up nearly a half point from 4.05 percent a year earlier and nearly as high as the 4.55 percent in 2012. During the height of the last downturn in 2010, the figure climbed to 5.27 percent.
Even though the delinquencies are on the rise, the amount owed by these borrowers is smaller on a percentage basis because the total value of auto loans has risen at a faster rate due to ever higher transaction prices. The Fed estimates the total outstanding auto loans is some $1.3 trillion, an increase of 79 percent from the amount owed by auto borrowers in 2010.
The report also observed that many of those who are behind in their payments are under 30. The delinquency rate for that cohort is 4.04 percent compared to 2.36 percent for all ages combined.
GMC has taken the wraps off its facelift of the 2020 GMC Acadia. In addition to a new grille, GM’s truck division has added an off-road AT4 trim level.
Catch up on all new vehicles on sale as the 2019 model year gets in full swing by visiting our Class of 2019: All The New and Redesigned Cars, Trucks and SUVs.
As truck popularity peaks, the time is right for Kelley Blue Book’s 2019 Full-Size Pickup Comparison Test. We pit the Ford F-150, Chevrolet Silverado and Ram 1500 against each other.
In the market for a new car? Explore these useful tips on how to get the best deal: