VOL 6, ISSUE 5, MAY 2012 

KEY SALES TRENDS
STARTING THE YEAR IN 2012

Brian Murphy from J.D. PowerBrian Murphy from J.D. Power shared market dynamics from the first quarter of 2012, discussing some key trends.

  1. Strong used vehicle demand:
    The used market has continued to grow about 1% per year over the last several years.

  2. Days to turn climbing:
    Days to turn have returned to a more “normal” level for both new and used; 60 is the standard for both used and new.

  3. Type of purchase is changing:
    Leasing is all but gone, cash purchases are down, finance is more important than ever. Solid relationships with your lenders are critical and a competitive edge.

  4. Higher used vehicle transaction prices:
    Used vehicle transaction prices have exhibited unprecedented growth to record levels. Used front end vehicle gross has dropped by about $400 (or 25%) in the last 5-6 years, challenging dealers to get that back from F&I products and other services.

  5. Lower incentives and higher prices on new vehicles:
    The average used vehicle is selling for $18,012, while the average new is $31,229. Offsetting that, each new unit averaged incentives of $4600 or 14-15% of the price.

  6. Stable monthly financing payments:
    Used car payments are at an average of $429 a month, which is almost unchanged over the past 5 years.

  7. Improving and more flexible financing options:
    Improved credit availability is helping lower credit buyers return to the market, and longer term loans are helping to offset higher prices. In fact, now 31.8% of financing is for over 66 months as compared to only 22.7% in 2010. As mentioned in point 6, monthly payment budgets are stable, but the number of months in the term is increasing to help people afford higher price points.

  8. Increase in trade-ins, and tradein retention:
    More and more customers are bringing in trade-ins - 56% more than in 2008. This could be a very important source of inventory to offset supply issues.

  9. More older, higher mileage used vehicles:
    Recent model year, low mileage vehicles (those ideal for CPO) are especially hard to find.

  10. Real financial pressure:
    Vehicle cost is up 6% since 2008, putting significant pressure on margin.

Brian also shared some interesting details about CPO program buyers, who are:

  • more likely to bring their car back to you for service,
  • more likely to recommend your store, and
  • less price sensitive for service than non-CPO customers.

The bottom line: they’re a good client to have, and a good client to keep. Their overall value to you extends far beyond that single vehicle transaction. The data used in Brian’s presentation is from J.D. Power and Associates Power Information Network (PIN) which is a large database of Canadian vehicle transactional data. OEM franchised retailers can have access to this data to help support business decisions including used car valuation using actual transactional data. Access is free of charge for retailers who participate in the PIN program.

To contact Brian for more information:

Brian Murphy
brian_murphy1@jdpa.com
416.507.3253
Senior Manager, Automotive Practice
J.D. Power and Associates


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Key Sales Trends Starting the Year in 2012
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