This Week in Car Buying: Minivan bargains scarce; More off-lease cars coming; Dealers push back on upgrades, Zoyte signs dealers
Minivans, as a segment, have taken a big hit since their 1990s peak. Just about every manufacturer made one. Now, the segment is stable at about a half million units per year divided among five brands, Chrysler, Dodge, Honda, Kia and Toyota. In this environment, average transaction prices have been steady and going up, while incentives remain below industry average.
As a result, if you’re looking for a minivan bargain, they may be hard to find. In fact, those who put affordability at the top of their list are most likely to buy the least expensive model on the market, the 2019 Dodge Grand Caravan. And in fact, last year’s segment leader was the Dodge with more than 150,000 sales.
Clearly, those who want a minivan, need one and makers recognize that. Even though both the Honda Odyssey and Chrysler Pacifica were recently redesigned, the Grand Caravan is long in the tooth as is the Toyota Sienna, which was last renewed in 2010. Its sales have dropped to less than 90,000 and now is fourth in the segment.
But don’t look for any deals anytime soon on it, as a top Toyota executive admits that there’s little incentive to put spiffs on the vehicle between now and when its next redesign.
"When it gets late in its life cycle, you've got to decide — typically, we will prop up a vehicle late in its life cycle with incentives," Toyota CEO Jim Lentz told Automotive News. "But you've got to look at the segment that you're in. And in some cases, that doesn't make good business sense to do, and I think that's what's happening with Sienna."
Adding to this disincentive is the fact that Sienna is built at the automaker’s Princeton, Indiana, assembly plant alongside the decidedly hotter selling Highlander. As a result, Toyota doesn’t need to juice Sienna sales since Highlander volume increased last year by 13 percent to hit over 240,000 sales.
"There's a next generation that should be coming, so let's let it take a little bit more of its natural fall," Lentz said of the Sienna. "I can build another vehicle in that same plant right now, so don't chase volume just by throwing big incentive dollars. Wait for the fresh new product to come, because there have been some big incentives thrown [by competitors] against that segment."
More off-lease vehicles coming
The tsunami of off-lease vehicles that was supposed to send late model used vehicle prices plummeting is still yet to hit the market. However, economists at Cox Automotive, parent of Kelley Blue Book, are expecting a record number of these vehicles to become available next year with 300,000 more reaching the end of their contracts during the year than were available last year. Cox estimates the total number coming off lease will peak this year at 4.1 million, 36 months after the industry set an annual sales record of 17.6 million units.
This may soften prices somewhat, however some analysts see a fundamental shift in how these cars make their way back to the market, a process that eases the downward pressure on values. Rather than flooding wholesale auctions, which would have a major impact on resale, more of these vehicles are being absorbed by the dealers who wrote the original lease for resale as a Certified Pre-Owned vehicle.
Tom Kontos, executive vice president and chief economist at ADESA Analytical Services, told Automotive News that this percentage of off-lease vehicles going back to the originating dealer or a franchise of the vehicle’s brand is rising. "So, with a high percentage of purchases happening upstream, there were comparatively fewer vehicles working their way downstream into physical auctions," Kontos said.
Also propping up prices is higher CPO demand as buyers who can’t afford a brand new car seek out a late model alternative in the second-hand market.
Dealers push back on upgrades
At this year’s annual convention of the National Automobile Dealers Association, it appears that some of its members are pushing back against the factories for their insistence on facility upgrades. Periodically, manufacturers have programs requiring upgrades to aging dealer stores to reflect a new color scheme or design consistent with the brand image that the automaker is trying to project.
However, the cost of these upgrades at a time when margins are shrinking and new models of vehicle ownership like subscriptions along with greater interest in digital retailing have some franchises asking why these expensive renovations are needed.
“We only have so much money as retailers. It's a finite number," said Wes Lutz, outgoing National Automobile Dealers Association chairman and president of Extreme Dodge-Chrysler-Jeep-Ram in Jackson, Mich. "Everything we need to do is vying for that money. If you can't show me where it's going to sell more cars, I don't think it's fair to ask us to do it."
Zoyte signs dealers
Also at the convention, automaker Zotye announced that it has signed 19 dealers as part of a network that could be the first to sell Chinese-branded vehicles in the U.S. as early as 2020. According to Zotye’s business plan, it is looking to open sales in the top 80 U.S. markets with somewhere between 300 and 325 dealerships.
The company hasn’t said what it plans to export to America, but speculation has settled on the T600 crossover, which the company has been selling in China since 2013.
In addition to Zoyte, Guangzhou Automobile Group (GAC) was also at the convention looking for prospective dealers. GAC showed the Entranze electric vehicle concept at the North American International Auto Show in Detroit as well as some of its range of existing vehicles, which includes the GS8, GS7, GS5, and GS3 crossover SUVs, the GA4 sedan, the GM8 and GM6 minivans, and the GE3, a compact battery-electric vehicle with a claimed 329-mile range.
Mazda has redesigned its popular Mazda3 compact. We get an early look at the sedan version of the 2019 Mazda Mazda3 in this First Review.
Honda has jumped into the 2-row midsize SUV market under the revived Passport nameplate. Check out our first driving impressions of the 2020 Honda Passport here.
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: