Tag Archive | "Edmunds"

Edmunds: Stage Set for Market Contraction

SANTA MONICA, Calif. — A week after saying a strong economy is likely masking market factors bubbling just below the service that could start to slow down sales, Edmunds reported on Tuesday that auto loan interest rates in June likely reached their highest level since 2009.

The annual percentage rate on new financed vehicle averaged 5.82% in June, up from 4.96% in June 2017 and 4.10 in June 2013. The firm’s analysts point to the most recent rate hike by the Federal Reserve as a contributing factor, noting that June marks a 17% total increase since January 2018, when APRs averaged just below 5%.

“Auto loan interest rates have been steadily on the rise this year and we don’t see them going down anytime soon, which could mean trouble for automaker sales through the end of the year,” said Jeremy Acevedo, Edmunds’ manager of industry analysis. “While some shoppers may take this as a cue to purchase new vehicles now while rates are still somewhat favorable, we’re getting dangerously close to a tipping point. Shoppers with average or subprime credit may end up putting off purchases as financing vehicles get increasingly more expensive.”

The firm noted that zero percent interest loans reached their lowest level in nine years in June, accounting for just 5.6% of total finance deals, compared to 9.47% in June 2017 and 10.55% in June 2013.

Edmunds revealed another problem in its midyear automotive trend report, which was released last week. It noted that the number of buyers who owe more than their vehicle is worth remains high, with 14.1% of buyers owing more than their car was worth. That’s down from 14.2% in 2017 and 14.6% in 2015 — the latter being a 14-year high.

“June typically boasts a substantial amount of zero percent financing offers, so this is a big red flag,” added Acevedo. “This might be a sign that access to cheap and easy credit — a post-recession hallmark that we’ve all grown so accustomed to — could be officially over. But there’s hope yet — the true indicator will be whether zero percent deals materialize through the rest of the summer selling season, which automakers typically rely on to clear outgoing model-year inventory.”

Edmunds put June sales at 1.52 million new cars and trucks and the month’s seasonally adjusted annual rate at 17.1 million, reflecting a 4.1% decline in sales from May but a 3.4% increase from June 2017. Through May, 2018 sales were up 1.1% compared to the same period in 2017. However, the firm noted that the month-to-month fluctuations are enough to give the industry pause.

As for retail sales, Edmunds put June’s retail SAAR at 13.9 million units, with fleet transactions accounting for 18.4% of total sales. Additionally, 3.2 million used vehicles were expected to be sold in June, for a SAAR of 39.2 million. That down from 3.3 million used sales in May, which had a SAAR of 39.3 million.

The firm also noted that millennial new-vehicle purchases hit a record high through May, with 21% of millennial car purchase being new.

“The strength of the economy is creating a very thick force field for automakers now, but once that starts to weaken, there are a lot of market factors bubbling just below the surface that could really start to slow down sales,” said Jeremy Acevedo, manager of industry analysis at Edmunds. “Even though millennials are finally starting to buy new vehicles, the U.S. market is virtually saturated. Add to that record-high vehicle prices, rising interest rates and historically high numbers of people who owe more than their cars are worth, and the stage is set for a market contraction.”

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Auto Loan Interest Rates Soar to Eight-Year High

SANTA MONICA, Calif. — Interest rates on new-vehicle loans were expected to soar to their highest point in eight years in February, Edmunds said last week. The annual percentage rate (APR) on new financed vehicles averaged 5.2% in February. That’s up from 4.9% in 2017 and 4.4% five years ago.

Edmunds experts point to an expected decrease in the number of loans in the 2% to 3% APR bracket and an expected increase in loans in the 4% to 7% range as the driving force behind this rise in the average.

Because this shift is happening in the mid-range of APRs, it means car buyers who qualify can still find deals, and the market isn’t facing a flood of subprime buyers. The percentage of loans with interest rates between zero percent and 2% is expected to remain steady at 22% in February, compared to 21% in February 2017. On the opposite end, the number of loans with interest rates above 7% is also expected to remain steady at 19% in February, compared to 18% in February 2017.

“We’re starting to see a trickle-down effect from the rate increases happening at the federal level,” said Jessica Caldwell, Edmunds executive director of industry analysis. “The Fed rate hikes directly affect unsubsidized loan rates offered by third-party lending institutions such as credit unions and banks, and, as a result, we’re seeing loans that were formerly between 2% and 3% being pushed up into higher APR brackets. Additionally, dealerships can match these independent loan rates brought in by shoppers.”

Edmunds analysts say that higher interest rates and near record-high lease returns could also be a contributing factor toward lease penetration levels hitting an all-time high of 33.5% in February.

“Car shoppers tend to have tunnel vision when it comes to their monthly payments,” said Caldwell. “As average transaction prices and interest rates rise, we’re likely going to see more consumers explore the option of leasing. In some cases, this is a result of consumers simply seeking a way to cut down monthly payments, but for many others, this may be the only option available when they discover that they can no longer afford the costs of a new vehicle.”

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Lease Volume Reaches Record High in 2016, Edmunds Reports

SANTA MONICA, Calif. — Automotive lease volume reached an all-time high of 4.3 million vehicles in 2016, according to the latest Lease Market Report from Edmunds, account for 31% of new-vehicle sales in 2016. That’s up from 29% in 2015.

Over the past five years, lease volume has grown by 91%. And as the popularity of trucks and SUVs grows — SUV sales surpassed passenger car sales for the first time ever in 2016 — consumers are turning to leasing to help them afford these higher priced vehicles.

“Leasing has long been the gateway for car shoppers who are looking to get a nicer vehicle than they could if they financed,” said Jessica Caldwell, Edmunds executive director of industry analysis. “Because SUVs and trucks are holding their values so well right now, it makes them much more accessible for a much wider swath of the market, further fueling their popularity.”

The average lease payment in 2016 was $120 less than the average finance payment. For large SUVs, the average lease payment was $125 less, and for large pickup trucks the difference was $206, thanks, in large part, to high residual values. Lease terms have hovered at a fairly constant average of 36 months over the past five years, while the average finance term is continuing to creep upward — averaging 69 months in 2016 (compared to 64 months in 2011).

While millennials still only leased 12% of all vehicles leased in the United States in 2016, they opt to lease more proportionally than all other age groups. Nearly one-third of all millennials who purchased a new vehicle in 2016 chose to lease — up from 21% in 2011. Millennials also accounted for the highest share of lessees with a household income under $50,000, which, according to the vehicle information site, presents a significant opportunity for automakers looking to capture the hearts and wallets of these likely first-time car buyers.

“Leasing hits a sweet spot for millennials — they can enjoy the benefits of owning a new vehicle at a low price point with the latest features they crave,” Caldwell said. “If automakers make a positive first impression with this influential group, they have a great opportunity to build lasting relationships as brand loyalty rates are much higher among shoppers who lease vs. buy.”

Luxury brands still capture the most lessees, but brands that have a heavy truck and SUV lineup are starting to play catch up. Brands like RAM, GMC and Chevrolet, which historically had lease penetration rates hovering between five and twelve percent five years ago, have seen lease rates jump more than 100%.

“While we think overall lease penetration will start to level off to 30% in 2017, the shift from passenger cars to trucks and SUVs shows no signs of slowing down,” Caldwell said. “As long as gas prices remain low and residual values on trucks and SUVs stay high, that segment of the lease market is likely to continue to expand this year.”

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Last Chance: Podium to Present Webinar on Online Review Management

TORRANCE, Calif. — On Thursday, February 16, 2017, at 11:00 PT/2:00 p.m. ET, Podium will host a free webinar “7 Quick ways to drive purchase decisions with online reviews,” with Director of Automotive Sales Dan Wright and Vice President of Marketing Nico Dato.

We all know that selling cars is a competitive business, so standing out among your peers can be difficult. You spend thousands of dollars on advertising and billboards. But what happens when they research you online? If you have a bad rating, odds are they’ll keep looking because a vast majority of car buyers now trust online reviews as much as personal recommendations. But reviews do more than just enhance your online reputation. They can also help you get noticed on sites like Google, Cars.com, DealerRater, and Edmunds and drive purchase decisions from customers.

Join us for this webinar to learn how online reviews can help you build a loyal customer base and sell more cars. Key takeaways include:

  • Why online reviews are important for your business
  • How online reviews influence buying behavior
  • Tips for building your online reputation on the sites that matter most

To sign up for the webinar, click here.

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Edmunds Updates App with Messaging Platform

SANTA MONICA, Calif. — Edmunds.com has updated its mobile app with a new feature that allows shoppers to send text messages to dealers.

Edmunds texting solution uses a phone’s native texting platform, meaning all smartphones are capable of messaging dealers without relying on any other apps. Edmunds says that 34% of car shoppers told the company that they would prefer text messaging with dealers over phone calls and email.

“More and more shoppers are turning to text messaging for their customer service needs,” said Seth Berkowitz, Edmunds.com president. “Edmunds.com’s app seamlessly integrates text messaging to thousands of dealers nationwide, so now consumers can text a sales or service inquiry and receive a timely, customized response from a dealership representative.”

Users of the app can also receive instant video and picture messages from dealerships for vehicles on the dealer’s lot. When a shopper no longer wants to text with a dealer they can opt out of a conversation at any time by typing “STOP.”

In addition to the new messaging feature, the Edmunds app allows shoppers to browse and identify inventory in their area, get upfront price guarantees on cars in stock through Edmunds Price Promise and crunch numbers using the monthly payment calculator.

Download the Edmunds free car shopping app here.

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Edmunds Pulls Ad Campaign, Says It ‘Missed the Mark’

SANTA MONICA, Calif. — Edmunds today pulled an online advertising campaign designed to promote its Price Promise program after backlash from dealers. The campaign, which was launched Monday, included four YouTube videos that depict a cashier trying to overcharge customers for items at a grocery store, then haggling with shoppers who refused to pay.

At least one dealer group, Cincinnati-based Jeff Wyler Automotive Family, canceled its subscription to Edmunds after the videos were released — meaning the dealer group’s inventory will no longer be listed on the third party lead provider’s site.

“We did cancel Edmunds across the board, and this was kind of the straw that broke the camel’s back,” E-commerce Director Kevin Frye told F&I and Showroom, noting that the cashier in the videos was clearly meant to portray an unscrupulous dealer. “We’ve been utilizing the Price Promise leads. We have sold cars, but we really haven’t found any return on investment. So as we plan for 2015 ad budgets, they were already on the fence. And this campaign was … kind of the final decision maker.”

Edmunds’ Price Promise program issues shoppers a locked-in price for a vehicle to prevent haggling at the dealership. All four videos associated with the program were pulled from the company’s YouTube channel today.

“Our digital videos illustrating the ‘Absurdity of Haggling’ missed the mark,” said Edmunds in a statement issued to F&I and Showroom. “Some of our partners were deeply insulted, expressing that our attempt at humor reinforced outdated stereotypes. That was obviously never our intent. It has created a distraction from our business of helping to make car shopping easier.

“We are terminating the videos and getting back to working with our dealer partners to improve the car buying process for car shoppers around the country.”

Despite Edmunds’ decision to pull the campaign, the Jeff Wyler Automotive Family does not plan to reconsider its subscription cancellation.

“It’s really struck a chord,” Frye said. “There are a lot of dealers just like ourselves that work incredibly hard to improve the industry and raise it to a higher level and it just feels like … we get caged into this negative stereotype no matter what we do, because they can financially gain from it.”

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