General

This Week in Car Buying: Sales dip

01 2017 Toyota Rav4 Comparo
02 2017 Toyota Rav4 Comparo

While still holding between a healthy 16 and 17 million annual sales rate, the auto industry saw July sales drop nearly 7 percent over year ago levels as the market flattens out. No one is predicting a big downturn, but the lower totals are a reflection in part of manufacturers looking to cut less profitable fleet sales and a consumer preference for fewer cars (down 15 percent) and more crossover SUVs and trucks (down only 1.9 percent). Year-to-date sales dropped at a much more modest rate of 2.9 percent.

Toyota and Subaru were among the makes that saw gains in July, up 3 and nearly 7 percent respectively. Toyota’s numbers were buoyed by the strongest month ever for the RAV4, which sold in excess of 41,000 units and is the company’s largest volume model.

All the other major manufacturers saw declines ranging from 7.4 percent for Ford to as much as 15 percent for General Motors. FCA saw a drop of 9.5 percent. GM attributed much of its drop to an 80-percent cut in rental deliveries to just 2,700 units. However, the company booked a 40-percent increase in commercial fleet sales totaling 17,300. Those sales, GM says, are more profitable because those cars are better-equipped and sold closer to invoice than daily rental vehicles. The retreat from the rental market is also a move to help prop up resale values as more lease cars are returned and sold by franchised dealers as Certified Pre-Owned (CPO) units.

As sales decline and inventories grow, look for current incentive programs to continue through the balance of the summer. According to J.D. Power, incentives averaged $3,876 per unit through the first half of July. This was a high for the month and also a 7.8-percent gain from the previous July record set last year.

Among the latest rounds of incentives announced was $1,000 cash back on the all-new 2017 Jeep Compass. The FCA division saw sales drop 12.3 percent in July and the new offer comes on top of $2,500 in discounts on the 2017 Jeep Cherokee and a $0 down 3-year lease on Jeep Wranglers for $359 per month.

Also: Get your first look at the new and redesigned cars of 2018

Transaction prices, used car market firm

Even though the market is slowing slightly and incentives climbing, these developments have yet to have an impact on both transaction prices and the used vehicle market. According to Kelley Blue Book data, average vehicle transaction prices climbed nearly two percent in July to $34,721, a gain of $573 from a year earlier. However, on a month-over-month basis, the ATP is beginning to moderate some, decreased 0.3 percent from June to July.

“Once again, the declining sales of cars and the growing popularity of SUVs are driving up the average transaction price,” said Tim Fleming, analyst for Kelley Blue Book. “Despite modest sales growth for SUVs in a down market, transaction prices in these segments are not particularly strong, with compact SUVs up just 1 percent and midsize SUVs flat. However, cars could fall to just 35 percent overall sales in July, and this shifting sales mix is certainly imping increase most manufacturers’ ATP.”

This effect is most readily seen where declining stocks of Chrysler 200 sedans and increasing sales of the more expensive Pacifica minivan is seeing that brand’s ATP increase 8 percent year-over-year. Jeep also climbed 4 percent on stronger Jeep Grand Cherokee sales. GM saw its ATP drop 2 percent in July despite a 5-percent increase in Cadillac prices. Buick declined 4 percent with Enclave dropping 7 percent as that model nears the end of its life cycle and its replacement awaits a launch later this year.

Meanwhile, prices in the used vehicle market continue to hold up, absorbing a flood of off-lease vehicles. KBB sister company Manheim Auction reports that its Used Vehicle Index remained stable through the second quarter. Jonathan Smoke, chief economist for Cox Automotive (parent to both Manheim and KBB) said “strong” demand for used vehicles is keeping prices up. Also helping is that the mix of these returning vehicles are higher priced and in-demand trucks, crossovers and SUVs. The test of whether these values can hold up will come later in the year with the closeout of the 2017 model year and what sort of new vehicle inventory is on hand and the level of incentives being offered. If both are high, then it’s likely demand for late model used vehicles is likely to drop or prices moderate.

01 Lync And Co 01 Suv
03 Lync And Co 01 Suv
07 Lync And Co 01 Suv

Lincoln takes on Lynk & Co.

Saying that the Lynk & Co. brand name is too much like Lincoln, Ford has sued Geely Holding Group over its trademark for the new auto brand the Chinese company is hoping to launch in late 2019. Lynk & Co. has shown it Concept 1  crossover and Concept 3 sedan, which ride on a compact vehicle platform and use powertrains developed by its sister company Volvo. Lynk is looking to sell cars online and through factory owned stores.

According to Automotive News, the U.S. Patent and Trademark Office has given an extension to Ford to formally challenge Lynk & Co.’s trademark application. A Lincoln spokesman told the trade paper in a statement that “The Lincoln brand has a rich 100-year history and we intend to protect its reputation. Lynk & Co. is infringing on the Lincoln…trademark and we are taking legal actions to prevent them from using their infringing mark. Their name as it stands will confuse customers.” Lynk & Co. did not immediately respond to a request for comment.

Banks tighten loan standards

The latest survey of senior loan officers by the Federal Reserve indicates than lending institutions are tightening standards on auto loans and credit cards, while guidelines for other consumer loans remain unchanged. While the banks are tightening some standards, like raising the minimum required credit scores for loans, there is no evidence that the institutions are looking to rein-in new car loan terms, which have been pushing out to a long as 84 months.

Coincidentally, the survey found some there may be some softening in the demand for new car loans at the margins. While 72.3 percent of the respondents said loan demand was about the same in July, that figure was 80 percent back in April.

The rundown

Check out the This Week in Car Buying Podcast here.

What you know can save you money, especially when it comes to conditional rebates geared toward your veteran or school status. Read more about these deals.

Mazda has added some new equipment and held the line on prices on its 2018 Mazda3. Base models start at $18,970.

Looking to make some changes in its approach to EVs, Mercedes-Benz has dropped it B-Class Electric Drive from its 2018 lineup. Only 3,651 of them have been sold since 2013.

In the market for a new car? Explore these useful tips on how to get the best deal:

Kelley Blue Book’s Complete Guide to Incentives

All you need to know about leasing

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