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Good news for dealers… Kelley Blue Book reports there has been an overall increase in recent wholesale market values, a reversal of the trend of last year in which used vehicles fell along with new vehicles. This year’s increase in average prices was greater than had been expected.
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Good news for dealers… Kelley Blue Book reports there has been an overall increase in recent wholesale market values, a reversal of the trend of last year in which used vehicles fell along with new vehicles. This year’s increase in average prices was greater than had been expected. ‘spots n dots’ recently had an article regarding how used vehicles may lead the entire automotive industry back to recovery. USED CARS Because the “scrappage rate” is expected to be 12 million vehicles per year, and new vehicle sales are expected to be around 10 million or lower this year, sales of used vehicles will need to fill that gap. Auction company, Adesa said that after suffering their largest monthly decline ever in October of last year, average wholesale prices started to recover slightly in November and December—ahead of a 3% month-over-month rise in January. This led to Ford’s head of marketing Jim Farley saying, “The used-car market has come roaring back...and that shows that there is some credit availability out there.” It has always been the case that on average, margins for dealers have been better on used vehicles than there are on new vehicles, so any positive sales trend in used vehicles can offer some hope to beleaguered dealers and dealership groups. “It’s a glimmer of hope for the industry,” Edmunds.com senior analyst Jesse Toprak said.
KNOW THE USED CAR BUSINESS Dealerships may offer benefits such as certificationsto entice buyers. The nation’s used car market includes 43,000 independent used car dealers Industry revenues total $48 billion However, the market is larger overall. These dealers must compete with each other, the private sale market, and the used car departments which operate at approximately 21,500 franchised new car dealers. The market for used cars is about 43 million units a year while The new car market is at about 16.5 million units a year In 2007, “new car dealers” sold over 18.5 million used vehicles
FACTS ANNUAL SALES PER LOCATION:$2.34 MILLION annually per location (national average based on sales figures from 25061 Used Car Dealers compiled by the U.S. Census Bureau's latest Economic Census) PEAK SALES MONTHS / SEASONS:Peak months for used car dealers, according to the U.S. Census Monthly Retail Trade Survey for 2007 Retail Peak Sales, are March, May, & August. CALENDAR MONTH % OF ANNUAL SALES: JANUARY 7.6% FEBRUARY 8.2% MARCH 9.1% APRIL 8.4% MAY 9.0% JUNE 8.6% JULY 8.5% AUGUST 9.2% SEPTEMBER 8.3% OCTOBER 8.3% NOVEMBER 7.5% DECEMBER 7.2% Used car sales remain steady month to month.
CALCULATE A WORKING BUDGET Approximately 2.5% of retail sales—Most independent dealers allocate 5-10% of gross profit per retail sale for advertising, according to the NIADA.1 In 2006, independent dealers increased advertising $4 per vehicle over 2005, totaling $268 spent per vehicle.2 In 2007, the average selling price of a used car was $15,714, a 1.3% increase over the price in 2006. Used vehicles accounted for 29.4% of total dealership sales, compared to 29.1% in 2006.3 These dealers should also keep in mind the potential for boosting revenues with accessory sales. The NADA reports that the accessories market is worth approximately $38 billion.4 1. Source: National Independent Automobile Dealers' Association 2. Source: NIADA Used Car Industry Report 2007 3. Source: NIADA, Industry Analysis 4. Source: NADA, July 15, 2008
What is the volume of “new car” sales versus “used car” sales in the U.S.? • New: 16.5 million units • Used: 42.5 million units • (2006 U.S. Car Sales) • What is the “used car” sales breakdown among Franchise Dealers, Independent Dealers, and Private Sellers? • Franchise dealers: 14.3 million units • Independent dealers: 13.7 million units • Private sellers: 14.5 million units • Many customers are asking about auto “certification”, is this trend increasing? Please break it down between “new car dealers”, “used car dealers, and “private individuals”? • Yes. Certification at dealerships was 1.6 million, a 132 percent increase from 2001, when 708,000 were sold. It has certainly gone up since 2001. • (Source: The Gazette, "Customers pay more to get safety, reliability of 'certified used' autos." Debbie Kelley, August 22, 2007) • New car dealers 65% • Used car dealers 22% • Private individuals 9% • Other such as rental car companies 4% • (Source: JDPower and Associates "2006 Used Vehicles Sales & Certification Study", used car sales occurred at the above locations) • Where are “used car” sales occurring? • CNW Market Research notes that 2006 used car sales occurred at: • Franchised car dealerships 33% • Independent car dealerships 33% • Private channels 33% ﾠ • Source: 2007 Crash Study, www.cccis.com, May 2007 Q&A
CERTIFIED USED DEALERS A used car is a used car is a used car. Not anymore, say auto manufacturers, whose certified used vehicles have created an option for buyers between the new and used-car markets. “‘Certified used’ is the industry’s fastest-growing segment because not everybody can afford to buy a new car, and they want a used car that’s going to be safe and reliable,” said Paul Pejza, manager of General Motors Corp.’s certified used vehicles division in Detroit. “Certification says the dealer has inspected it, repaired it and stands behind it,” she said. The concept has become a hot industry trend because it’s allowed manufacturers to turn the used-car buying experience into something similar to the new-car buying experience, said Philip Reed, consumer advice editor for Edmunds.com, a Santa Monica, Calif.-based online automotive site, and author of “Strategies for Smart Car Buyers.” Buyers pay more for the extras, like repairs that were made and an extended warranty, than they would for a used car that doesn’t carry the manufacturer’s certification sticker. Consumers typically pay an average premium of $1,680 for a certified used vehicle, according to a 2006 study of used- vehicle sales and certification by J.D. Power and Associates. Source: Gazette August 21, 2007 article by Debbie Kelley
IDEAS THAT ARE WORKING NOW Idaho Falls “CWheels” This concept is a 30 minute program consisting of ten 2:00 segments with an open and close. The remaining time is sold to industry related businesses such as “Auto Repair”, “Financial”, or “Detailing”, etc. Of course it also consists of advertising the show itself. CWheels runs a promotional schedule directing people to a particular time and date to watch the show too. All 2:00 segments are sold to used car dealers, independent dealers and individuals that want to highlight approximately 4 to 5 cars they want to move within their 2:00 segment within the show. These cars consist of various makes and models the dealers and individuals are anxious to move. The Idaho Falls market sells each 2:00 segment for $150…that’s $1500 per 30 minute show. The $1500 is much, much more than the normal amount he sells for a 30 minute program. Production is very easy with cars/trucks pulling up behind presenter one after another and can usually be done in one take. Monroe, Louisiana In Monroe, several active smaller dealers have gone dark. They feel they cannot purchase customers in this economic environment. We wanted to explore a way to bring back some automotive dollars we have recently lost due to the economy. We approached one dealer who went dark on our station and proposed an interesting concept. Used cars are a much larger profit margin for the dealers and we wanted to help them. We can impact the bottom line of the dealership with used car sales faster than with new car sales. We took an average of the used business the dealer has done over the last few months and factored in the sales volume of February of last year. We agreed on a target amount of used that he would normally sell. Our agreement is a true partnership. I have open inventory.. he has no budget. We are running a free schedule for used. Every car that he sells above the average we agreed upon, he will pay the station a $500 commission. We only make money if he moves iron... If he sells more than he would have and it costs us open inventory then we've got a friend for life. We stepped up when he needed it most and if we perform we get paid. When the economy returns to a more normal state, we'll never get shut out of a buy. We will have earned a friend for a long time.
IDEAS THAT ARE WORKING NOW Lubbock: Promote Your Area Dealers This is a local campaign we are running in our market for new & used dealers. We brand it for each of our stations so the CW station runs this spot with CW signage. We have had very positive feedback from our dealers. We offer this to those dealers that are on the air with us at no additional charge. This keeps those that are on our air very pleased and will look at us before any other station in the market and prompts those dealers that are contemplating advertising, signing with us first because of the support they will receive from us. Sherry Saffle/ GSM Tallahassee: KIA BOGO The KIA dealership in Tallahassee ran a campaign advertising buy a KIA Sorento or Sedona and get a KIA Rio or Optima free. They very quickly ran out of the available cars for that promotion. Currently they are advertising all 2008 models at 40% off. The campaigns they run make them one of the most successful KIA dealerships in the country. They also do regular 30 minute “paid” programs during various dayparts using a production company that provides talent. They are very creative with their production and do a great job getting the dealer’s General Manager involved.
Dealers Get Consumers to “INVEST” Here’s a new twist. Be the first to try it in your market. The automotive industry has hit all of us very hard. We must be “recession” selling and coming up with unique ideas that will help dealers increase ups and move cars. They aren’t interested in hearing agency jargon of how many points were bought and if the buy “posted.” They are interested in what makes the cash register ring. Now is the time to put our best “creative” foot forward and sell them on these unique ideas that will give them a reason to buy. Let’s take a look at how General Motors stock has performed over the past year. GM stock has literally tanked from over $24 per share of stock 52 weeks ago to $1.86 per share at market close on 3/5/09. WOW! Most auto manufacturers are now offering incentives never seen before in the industry. Huge rebates Zero loan percentage rates Buy one car and get the second free (Tallahassee KIA) All 2008 models 40% off Let’s look at and idea that will bring buyers into the dealerships and incentivise these same customers to return as a repeat customers in the future. We know that “rebates” work, but let’s do it with a CW twist. The concept is for the dealer to offer 500 or 1000 or 2000 shares of GM stock with the purchase of a “new” or “used” car or truck. This will be part of the many other offers they are making at the same time. The benefits for the customer are… When economy recovers, stock may return to $10, $15, or even back to the $24 it was 52 weeks ago. This may help pay for the car they just purchased. And when the customer is shopping for another car or truck, they will want to buy from the company of which they are part owners and have invested in, GM!!! Stock demand will go up as well. The dealers only need to take part of the “rebate” or “incentive” money they are offering customers now and offer the above concept. Talk with a dealer confidentially, Get them to commit to a 3 month contract. You may also want to present this idea to the local dealer group.
J.D. Power and Associates Reports: Buick and Jaguar Tie to Rank Highest for Vehicle Dependability Toyota Motor Corporation Captures Ten Segment Awards; Ford Motor Company Garners FourWESTLAKE VILLAGE, Calif.: 19 March 2009 — Buick and Jaguar each rank highest in vehicle dependability in a tie, according to the J.D. Power and Associates 2009 Vehicle Dependability StudySM (VDS) released today. Buick improves from a sixth-place ranking in 2008, while Jaguar improves from 10th place. Following in the top five rankings this year are Lexus, Toyota and Mercury.Toyota garners five segment awards—more than any other nameplate in 2009—for the Highlander, Prius, Sequoia, Solara and Tundra. Lexus follows with four segment awards for the ES 330 (in a tie with the Acura RL), GX 470, LS 430 and SC 430. Lincoln captures two awards for the Mark LT and Zephyr. Models by Acura, Buick, Dodge, Ford, Honda, Mazda, Mercury, Nissan and Scion each rank highest in one segment.“Buick has ranked among the top 10 nameplates each year since the study was last redesigned in 2003, while Jaguar has moved rapidly up the rankings,” said David Sargent, vice president of automotive research at J.D. Power and Associates. “Lexus remains a very strong competitor in long-term quality. In particular, the Lexus LS 430 sets the industry standard for dependability, with fewer problems reported than any other model in the study.”The study, which measures problems experienced by original owners of three-year-old (2006 model year) vehicles, has been redesigned to include 202 different problem symptoms across all areas of the vehicle. Overall dependability is determined by the level of problems experienced per 100 vehicles (PP100), with a lower score reflecting higher quality. The study is used extensively by vehicle manufacturers worldwide to help design and build better vehicles—which typically retain higher resale values—and by consumers to help them make more-informed choices for both new and used vehicles.
J.D. Power and Associates Reports: Buick and Jaguar Tie to Rank Highest for Vehicle Dependability “In the current economic climate, consumers are delaying new-vehicle purchases and keeping their vehicles longer—the average age of a vehicle at trade-in has increased to 73 months in 2009 from 65 months in 2006,” said Sargent. “This makes vehicle dependability even more critical. Automakers have improved long-term dependability by an average of 10 percent each year since the inception of the study, which is a testament to the industry’s commitment to continuously improve and sustain quality, especially long-term quality. Making improvements in long-term quality not only satisfies customers who are holding onto their vehicles longer, but it will also influence their decisions when they return to the new-vehicle market or are seeking to purchase a pre-owned vehicle.”The study finds that the frequency and severity of component replacement has a particularly strong impact on customer loyalty intentions. Component areas for which the impact is greatest include engine and transmission. When engine components are replaced or rebuilt, just 11 percent of customers state that they definitely intend to purchase or lease another vehicle of the same make, compared with nearly 40 percent among owners who report replacing no components.The study also finds that Buick, Lincoln, Mercury and Jaguar owners are less likely to replace components than owners of other vehicle brands. While component replacement rates are similar for premium and non-premium makes, there are notable differences between vehicle segments. Owners of models in the premium sporty vehicle segment are least likely to replace components, while owners of models in the van segment are most likely to replace components.The 2009 Vehicle Dependability Study is based on responses from more than 46,000 original owners of 2006 model-year vehicles. The study was fielded in October 2008.Find more detailed findings on vehicle dependability as well as model photos and specs by reading an article and reviewing brand and segment dependability ratings at JDPower.com.