Tag Archive | "Honda"

Leases Entice Drivers to Upgrade Cars as Often as IPhones


When Adam Gilgis leased a Volkswagen GTI this month, he had one goal: a low monthly payment, reported Bloomberg.

“We pay $320, which is perfect,” said the 35-year-old Chicago attorney. “If we finance the car, we’re paying thousands of dollars more over the course of several years.”

Auto leasing is back in a big way as automakers including Volkswagen AG and General Motors Co. pull back on discounts and rebates and entice Americans with ads promising cheap leases instead. So far this year, leases have accounted for about 27.7 percent of new-auto sales, according to Edmunds.com, the highest rate in years. Buyers like Gilgis shun long-term loans associated with outright purchases because increasingly they see cars as smartphone-like gadgets to be upgraded every few years.

“Like an iPhone, one can get a new vehicle with all the new technology and have a similar payment as before,” said Jessica Caldwell, an analyst for auto researcher Edmunds.com.

The recent surge in leasing is helping power U.S. auto sales, which are headed for the biggest year since 2007, when 16.15 million vehicles were sold. In June, five of the top six automakers beat analysts’ sales estimates. Lenders’ willingness to offer loans that stretch as long as eight years also is boosting sales. Terms of 73 to 84 months accounted for 24.9 percent of all sales in the first quarter, according to data from data services group Experian Automotive.

Once Tacky

Leasing was once considered tacky and financially frivolous, letting posers drive cars they could ill afford.

“Thirty years ago, if you rolled up next to someone riding in a BMW or a Porsche and you said ‘that car is leased,’ it was one of the biggest insults you could throw at someone,” said Mark Wakefield, a managing director at AlixPartners LLP. “Now, you’d say, ‘Yeah? So, what?’”

Attitudes began changing in the late-1990s, when mainstream buyers began leasing family sedans from Honda Motor Co. and Toyota Motor Corp. Now, with the economy improving and the financial crisis receding in the rear-view mirror, leasing is gaining traction once again. Automakers and banks are piling in because they’re betting that a robust used-car market means leased vehicles will hold their value after they’re returned. The higher the “residual value,” the less the car depreciates during the lease and the less consumers pay per month.

Drivers often weigh the cost of leasing versus taking out a loan and buying a car. With a 20-percent down payment on a Toyota Camry SE priced at $23,740, a 60-month loan costs an average of $341 per month compared with $207 for a 36-month lease, according to a TrueCar analysis.

Kia Sorento

Non-luxury buyers are leasing at a pace not seen since the late 1990s. Advertising consultant Drew Ament and his wife leased a Kia Sorento for $450 a month for 36 months in February.

“It’s good for me knowing that the lease gives her peace of mind,” said Ament, who lives in Phoenix. “I’m a guy who will get a car and then drive it until it’s dead. I have a Chevy Silverado right now that I’ll probably have until it’s done. My wife can’t do that. So, I pretty much give her a budget each month, and if it’s under that budget, then go for it. And she gets the most for her money.”

He’d rather not have a monthly payment, but considers it worthwhile to ensure his wife and children have a new vehicle that’s safe to drive.

“It’ll be nice maybe a couple leases from now to not have to lease a three-row SUV once the kids move out,” Ament said.

Auto leasing is a hotly debated topic. Consumer Reports has long said buyers are better off paying cash for a new car or taking out a short-term loan.

Hidden Fees

While leasing offers lower monthly payments and repair costs than buying new or used, Edmunds warns on its website that leasing vehicles is more expensive over the long run than buying a car and keeping it. The research firm also says lease contracts can be hard to understand and include hidden fees, including maintenance and damage charges. Simply exceeding the lease’s mileage limits, typically 12,000 miles per year, can cost a driver thousands of dollars.

Leasing also “puts you on a treadmill to buy a new car over and over every few years with no end in sight,” said Anthony Giorgianni, an associate editor at Consumer Reports. “Leasing is just a bad way to purchase a new car unless you’re a really wealthy individual and you just don’t care about costs. Otherwise, it’s smoke and mirrors.”

Jessica Caswell, communications manager at VSP Vision Care in Sacramento, California, said that when she leased a new Honda Civic she didn’t realize insurers often charge higher premiums and fees for leased vehicles.

Significant Sum

“It’s a significant amount of money, and you don’t really know about it when you sign the lease,” Caswell said.

She said she may buy the car once the lease is up.

Kevin Tynan, a Bloomberg Industries auto analyst, calls leases “the new incentive.” The question, he said, is how long can U.S. automakers rely on them to fuel sales.

Tynan said that when millions of previously leased vehicles end up on used car lots at cheap prices, it might make less sense for consumers to buy or lease a new vehicle.

“I think we’re about 36 months out from a period where pre-owned makes more economic sense for the average buyer,” he said. “New vehicle demand could flatten for a period beginning in 2017-18 as we work through all these off-lease autos.”

Long-term loans also could crimp sales because people don’t buy new cars when they are paying off the one they own. To ensure that doesn’t happen, dealers will have to get creative with their come-ons, said Larry Dominique, the president of TrueCar Inc., an online auto-buying service.

“It’s a bit easier with lessees since they tend to be customers who like new cars every couple of years, so you’d hope they’d be back,” he said. “But how can you build loyalty with those who buy their cars so that they’ll come back seven, eight years later? It’s challenging.”

One way to build loyalty is through giveaways and promotions, including free car washes, Dominique said.

“I’ve even gotten an offer to attend a free wine and hors d’oeuvres tasting at a dealership,” he said. “It’s coming up with things like that to engage customers that’s important.”

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Dealership Buy/Sell Activity Jumps 60% in Q1


Irvine, CA — Kerrigan Advisors, a firm specializing in serving dealership sellers, released its quarterly report on dealership buy/sell activity in the U.S. Market. It found that such activity increased dramatically in the first quarter.

Laying out the high, average and low multiples for each franchise in the luxury and non-luxury segments for the quarter, the Kerrigan Quarterly Blue Sky Report offers a detailed view of public and private company dealership acquisition activity. In addition to the sharp spike in selling, the report found that that blue sky pricing remains high for most franchises and that the market has established a pricing floor.

“As anticipated, an increase in the number of sellers coming to market has led to a major uptick in buy/sell activity,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “We attribute this to high blue sky prices, buyer demand for dealerships and a slowdown in dealership profit growth, meaning sellers are concerned about missing the market and want to ensure they exit on top.

“Private companies continued to dominate the market in quarter one, although public company activity rose slightly during the quarter and will likely continue to pick up after the announcement of Lithia’s acquisition of DCH,” she added. “The publics, however, are being very disciplined with their capital allocation. If they believe the better investment is their own stock, they are choosing a stock buyback over an acquisition. In the first quarter, collectively, they chose to spend 70% more on their own stock than on U.S. acquisitions.”

The firm found that buy/sell activity increased 60% in the first quarter and that more sellers are coming to market to capitalize on high blue sky values that may fade as earning growth slows. Blue sky values remain at elevated levels as dealership earnings continue to grow, albeit more slowly; and multiples remain high or reach higher levels.

The multiples for Honda, Toyota, BMW, Mercedes, Lexus and Porsche have increased since 2013, the report noted. As competition for auto retail market share heats up, buyers are placing an even higher premium on these franchises. And with the average dealership earning an annual 28% return on equity, few dealers are willing to sell their franchises for less than a 3x blue sky multiple in today’s market.

“While the future continues to look rosy for dealership acquisitions, we will likely start to see some negative shifts as increasing competition for car sales brings blue sky winners and losers,” Kerrigan concluded.

To read the full report, click here.

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Hyundai Bumps Honda at Top of Greenest Automaker Rankings


Via Bloomberg:

Hyundai Motor Co.’s quick embrace of downsized engines, electric hybrids and other anti-pollution technology helped the company unseat Honda Motor Co. as the most environmental automaker, a scientific research group said.

Toyota Motor Corp., Nissan Motor Co. and Volkswagen AG rounded out the top 5 in the rankings released today by the Union of Concerned Scientists, a nonprofit that works on climate change and nuclear-weapon control. Ford Motor Co., General Motors Co. and Chrysler Group LLC were at the bottom.

Companies that sell cars in the U.S. are racing to meet stricter greenhouse-gas limits that begin to step up in 2017 and will require automakers to double the average fuel-efficiency of their fleets to 54.5 miles per gallon by 2025. That has led to production of dozens of new hybrids, plug-in cars, electric vehicles and models powered by fuel-saving gasoline engines.

“While automakers have widely used a few key technologies to reduce the global warming impact of their fleets, other technologies on the horizon are also important,” the Cambridge, Massachusetts-based group of scientists said. It cited smaller turbocharged engines and hydrogen fuel cells.

Overall, all eight of the companies that sell most cars in the U.S. have reduced their global-warming emissions, the group said — the first time that’s happened in six reports going back to 2000.

The rankings didn’t take into account automakers with smaller U.S. sales, such as Elon Musk’s upstart Tesla Motors Inc.

Chevrolet Volt

Tokyo-based Honda had won the title in each of the group’s previous five assessments, which has been dominated by the three major Japanese automakers. Ford, GM and Chrysler were the only companies this year to score below the industry average.

Ford has made the most efficiency gains among the three-largest U.S.-based automakers, partly by expanding the number of hybrids it sells. Efforts by the Dearborn, Michigan-based company to boost the efficiency of “its smallest vehicles — the Fiesta and Focus — and its best-selling and largest vehicles, the F-series pickups, has helped bring its fleet performance to within a few percent of the national average.”

General Motors, which sells the plug-in electric hybrid Chevrolet Volt, hasn’t kept pace with the industry even though it has improved efficiency in its small cars, the group said. The Detroit-based automaker needs to improve its light-duty truck fleet to gain on competitors, the scientists said.

Hyundai, which also makes the Kia brand, was praised by the group for “a concerted effort” to improve fuel efficiency by turbocharging and downsizing engines, as well as for gasoline-electric versions of the Hyundai Sonata and Kia Optima.

“As Hyundai-Kia works to further improve fuel economy and electrify its fleet, Honda will need to step up its innovation if it wants to take back the crown,” the scientists wrote.

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Honda Recalls Nearly 25,000 Odyssey Minivans


Via NBC News

Honda is recalling 24,889 Odyssey minivans from the 2014 model year because their side air bags may not deploy during a crash.

Honda says a shorting terminal, which prevents deployment of the air bag before it’s put into the vehicle, may have been damaged during the assembly process. That may illuminate the air bag warning light and prevent the side curtain air bags from deploying.

Honda says no crashes or injuries have been reported related to the issue, which was discovered through warranty repairs.

Dealers will repair the minivans for free. Honda will notify owners starting May 16.

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Honda Motor Forecasts 3.6 pct Net Profit Rise This FY, Below Estimates


Via Reuters

Honda Motor Co on Friday forecast a 3.6 percent rise in net profit for the year to next March, below analyst estimates, saying it expects strong sales of the remodelled Fit compact car globally including in the United States.

Honda said it expects to post 595 billion yen ($5.8 billion) in net profit this business year, compared with the 700 billion yen mean estimate of analysts polled by Thomson Reuters I/B/E/S.

For the latest quarter to end-March, Japan’s third-biggest automaker more than doubled net profit to 170.5 billion yen, boosted by a decline in the value of the yen and strong sales in China and Japan.

Shares of Honda closed 1.0 percent higher ahead of the result, compared with a 0.2 percent gain in the benchmark index.

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Ford, Chevy and Toyota Lead the Way in Edmunds.com’s Inaugural Most Popular Vehicle Awards


Santa Monica, Calif. – Ford, Chevrolet and Toyota are the most decorated brands among a diverse selection of new cars and trucks that earned the 2014 Most Popular on Edmunds.com Awards. The inaugural awards were presented by the car shopping Web site at the 2014 New York International Auto Show.

Ford has the strongest representation of any brand recognized by the Most Popular on Edmunds.com awards, with 10 winning vehicles. Highlights include the Ford F-150, which was named one of the 2014 Most Popular on Large Trucks; and Ford Mustang, which was named one of the 2014 Most Popular on Entry Sport Cars.

Chevy and Toyota each earned seven awards. Highlights include the Chevy Colorado, which was named one of the 2014 Most Popular on Compact Trucks; and the Toyota Camry, which was named one of the 2014 Most Popular on Midsize Sedans.

Acura, Audi, BMW, Cadillac, Dodge, GMC, Honda, Infiniti, Jaguar, Jeep, Kia, Lamborghini, Land Rover, Lexus, Mazda, Mercedes-Benz, MINI, Nissan, Porsche and Tesla also were honored in a range of categories.

“Edmunds.com is in a unique position not only to offer independent and trusted reviews of every vehicle on the market, but also to see firsthand which cars and trucks most pique the interest of shoppers on our site,” said Seth Berkowitz, president, Edmunds.com. “By naming these award-winning vehicles, we hope that car shoppers have an easier time evaluating some of the excellent choices available on the market today.”

The 2014 Most Popular on Edmunds.com awards were determined by finding the three models in each of 23 vehicle segments with the highest total monthly car-shopper consideration in calendar year 2013. “Consideration” means the number of unique visitors during a calendar month to the research and inventory pages on Edmunds.com desktop site for each new model.

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