Tag Archive | "Kelley Blue Book"

Spending on New Cars Hits All-Time High, Even as Loans Stretch to Record Lengths

While May might not have brought the big uptick in sales we’ve seen in recent months, preliminary data suggest that automakers took in record revenues, with the average transaction price of new cars, trucks and crossovers sold last month climbing by at least 4%, reports The Detroit Bureau. 

All told, U.S. buyers spent a record $52 billion for their new vehicles in May, in part, due to a sharp, year-over-year decline in incentives, according to several firms that track monthly sales data. A separate study suggested that motorists are covering those higher costs by stretching their loans out longer than the industry has ever seen, an average 67 months.

“New vehicle sector and segment preference indicates consumers are confident about the economy and their finances,” said TrueCar President John Krafcik. “Not only are these shifts to premium brands and utilities telling from an economic indicator standpoint, they signal sizable revenue gains automakers should reap this year.”

The data tracking firm estimated that the typical vehicle had an average transaction price, or ATP, of $32,452, up 4% rom May 2014. Lower incentives played a role, but manufacturers have also seen buyers show more confidence by loading up on options and by trading up to higher-level vehicles. TrueCar estimated sales of premium brands jumped 10.6% during the first four months of 2015 compared to just 4.8% for mainstream brands.

BMW and its Mini subsidiary, saw prices jump in May by 6.5%, according to a separate analysis by Kelley Blue Book. Mazda saw a similar increase, while Ford and General Motors prices climbed a more modest 4.3% and 4.2% respectively. Toyota’s average price rose just 2.3%, even though it trimmed incentives by more than 10%, year-over-year.

With only a handful of exceptions, notably including General Motors, Hyundai and Kia, most makers trimmed rebates and givebacks as the U.S. auto market continued to gain ground. And analysts noted that the modest overall sales numbers for May actually misrepresent the market’s momentum, as the peculiarities of the industry’s reporting system counted fewer so-called “sales days” last month than in May 2014.

The surge in spending also reflects a year-long shift from fuel-efficient small cars and alternative-power vehicles to larger passenger cars, pickups and SUVs.

“With the national average price of gasoline down nearly a dollar per gallon on average from one year ago, truck and SUV demand remains strong, elevating average transaction prices,” Karl Brauer, senior analyst for Kelley Blue Book, said in a statement.

The steady climb in new car prices might come as a surprise to those worried about relatively stagnant middle-class earnings and the rising wealth gap. In reality, most new car buyers today register on the upper end of the middle-class spectrum. Even for compact cars, industry research often shows household income levels approaching six figures.

And buyers are simply stretching out their purchases to hold down monthly payments – while also encouraged by continuing low interest rates. Gone are the days of three and even four-year loans. Borrowers extended their loans terms during the previous quarter to 67 months on average, longer than ever for new cars, according to Experian Automotive.

“While longer term loans are growing, they do not necessarily represent an ominous sign for the market,” said Melinda Zabritski, Experian’s senior director of automotive finance.

On the plus side, the trend allows consumers to buy more vehicle without busting the household budget. On the downside, however, it means they likely have to keep those vehicles longer in order to avoid being upside-down on loans when trading in, cautioned Zabritski. That could foretell slower future growth of the automotive market.

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KBB: Car Shoppers Confident in ‘New’ GM

IRVINE, Calif. — Fifty percent of new-car shoppers think GM is a different company today compared to five years ago, while only 24% of new-car shoppers believe the ‘old’ GM still exists, reports Kelley Blue Book.

“Despite challenges with the recall announcements, General Motors CEO Mary Barra has successfully positioned the brand in a positive light, as evidenced by Kelley Blue Book’s survey results showing half of new-car shoppers think GM has changed in recent years,” said Tony Lim, director of research for Kelley Blue Book’s KBB.com. “By reinforcing the message of the ‘new’ GM and distancing itself from the ‘old,’ Barra can continue to effectively distinguish the company from its past.”

The survey data also revealed more than a quarter of new-car shoppers think GM is being proactive and transparent regarding the recalls.

“GM initiated the ignition switch recall versus having it ordered by the government, and the company’s proactive stance taken in the areas of vehicle safety oversight and victim compensation has enhanced the automaker’s image despite the high number of recalled models,” said Karl Brauer, senior analyst for Kelley Blue Book’s KBB.com. “GM is suggesting to consumers it is more transparent about quality and the safety of its owners.”

However, U.S. car buyers continue to question GM’s product quality, as the survey indicates mixed feelings regarding the manufacturer’s ability to make more reliable vehicles today than it did five years ago. Only 39% of surveyed new-car shoppers think that GM’s current products are more reliable when compared to five years ago.

“High-profile recalls will put pressure on views of quality and reliability for any brand, and while many consumers think GM is a different company today, inevitably perceptions of product unreliability still exist,” said Lim. “GM can overcome these challenges and change perceptions by focusing efforts on new-vehicle launches and commitment to innovative in-vehicle technology.”

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Cox Acquires 25% Stake in AutoTrader Group

Atlanta and Providence, R.I. — Cox Enterprises Inc. and Providence Equity Partners announced a definitive agreement by which Cox will acquire Providence Equity’s 25% equity interest in AutoTrader Group. Cox Enterprises now holds a 98% stake in AutoTrader Group, with the remainder being held by current and former employees. Financial terms of the transaction were not disclosed.

“With more than 32 million monthly visitors to our industry-leading sites, AutoTrader.com and KBB.com, AutoTrader Group continues to grow as a trusted and valued online automotive resource for customers across the nation. Our portfolio of media advertising and software products serves more than 27,000 dealer relationships, and we are confident we will continue to lead the way in connecting automotive dealers with the car-buying public,” said Cox Enterprises’ President and CEO John Dyer. “We have greatly appreciated Providence’s strong contributions to the company’s exceptional performance as a partner in this growth.”

Providence Equity acquired a 25 percent stake in AutoTrader in 2010 to help accelerate the company’s growth. Since that time, AutoTrader acquired Haystak Digital Marketing, HomeNet Automotive, Kelley Blue Book, vAuto and VinSolutions. The collective companies now constitute AutoTrader Group.

“We are extremely gratified to have partnered with Cox and the AutoTrader team,” said Providence’s Managing Director Michael Dominguez. “Through strategic acquisitions and the introduction of dealer software solutions, they have advanced the original vision of the company and created a game changer. We are proud to have contributed to its growth and believe the company has a very bright future ahead.”

AutoTrader Group operates a digital automotive marketplace and provides marketing and software solutions to automotive dealers throughout the United States. The company touches more than 62% of in-market automotive shoppers. AutoTrader Group also holds a 21.8% stake in Bitauto, a provider of Internet content and marketing services for China’s automotive industry.

“Since we launched AutoTrader.com 15 years ago, we have worked tirelessly to meet the needs of our customers by expanding our online and software products. With this acquisition, Cox Enterprises and AutoTrader Group will continue to look for opportunities to grow our leadership position and further innovate ways to meet the needs of car buyers,” said Dyer.

Cox Enterprises also owns and operates Manheim, a global provider of vehicle remarketing services. It registers nearly eight million used vehicles annually, facilitating transactions representing more than $50 billion in value.

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Conflicting Reports on Transaction Pricing in Dec. 2013

Santa Monica and Irvine, Calif. – TrueCar.com and Kelley Blue Book both released their numbers on transaction pricing for December 2013, and while the two usually have similar results, for this month there is a huge gap.

TrueCar.com noted that the average transaction price (ATP) for light vehicles in the U.S. was $30,786 in December 2013, down $201 (-0.6 percent) from December 2012; and down $35 (-0.1 percent) from November 2013. Kelley Blue Book’s numbers, however, showed that new-car transaction prices increased an average of $197 per month-over-month in December 2013, with the estimated average transaction price for light vehicles in the United States sitting at $32,890, up 0.6 percent, and down $159 (0.5 percent) year-over-year.

“Incentives, as a percentage of transaction price, are up for several brands – a trend worth keeping an eye on,” said Larry Dominique, executive vice president, TrueCar, and president, ALG. “Chrysler is one automaker that appears to buck this trend, showing positive momentum with a key product launch imminent.”

“Along with solid new-car sales, average transaction prices on new vehicles continue to strengthen this year,” said Alec Gutierrez, senior analyst, Kelley Blue Book. “Honda average transaction prices remain flat from last month, but are up a respectable 2.5 percent year-over-year with strong Acura prices (up 10.8 percent year-over-year), primarily due to the new MDX. Chrysler also revealed a solid increase year-over-year, thanks to better performance from its Jeep lineup. Jeep alone was up 2.5 percent year-over-year on the Grand Cherokee and Wrangler, while the Chrysler brand climbed 2.2 percent from this time last year due to a lower mix of its 200 model.”

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Kelley Blue Book Launches Enhanced New-Car Shopping Experience

Irvine, Calif. – Kelley Blue Book launched its new car pricing tool, the Kelley Blue Book Price Advisor. It features a new range-based pricing layout and highlights differentiating aspects of local dealerships, including consumer ratings and reviews, new-car specials and inventory.

“Today the car shopping experience begins online for most consumers, with more than 50 percent of all online car buyers visiting KBB.com during their shopping process. This means Kelley Blue Book plays a critical role in helping consumers become more assured they are making the right decisions during the vehicle shopping process,” said Jared Rowe, president, Kelley Blue Book. “In an effort to provide consumers with all of the information they need to make a confident buying decision, KBB.com has enhanced the consumer’s ability to discover what represents a fair price in his or her area. Ultimately, this will create a more transparent and confident car-shopping experience.”

The Price Advisor tool displays three different pricing zones for a specific make, model and trim combinations: white, green and red. The green zone is the KBB.com New Car Fair Market Range, which reflects current market conditions for a selected vehicle with the buyer’s chosen options in his or her area. The Fair Market Range is derived from a mathematical model that leverages Kelley Blue Book’s 87-year history of pricing vehicles. KBB.com’s Fair Market Range is updated weekly and aggregates new-car transaction data within the user’s zip code, and adjusts for local market conditions and seasonal trends. The white zone represents pricing that falls below the Fair Market Range, typically under special circumstances, such as a retiring model year or an unusually competitive market. The red zone falls above the Fair Market Range, and also is considered a special circumstance, where there could be exceptionally low supply with high demand.

In addition to receiving a New Car Fair Market Range, consumers can explore local dealerships’ inventory. Shoppers benefit from an improved understanding of local dealership services and amenities, new car specials, dealership social media feeds and dealer ratings and reviews. The experience also specifies proximity to the dealership based on zip code.

“Developed specifically for the needs of the new-car shopper, KBB.com’s Price Advisor puts a spotlight on transparency starting with pricing, and moves across all aspects of the dealership,” said Scott Ehlers, vice president of product, Kelley Blue Book. “It allows the consumer to access key information from Kelley Blue Book’s trusted brand about a new car, including current pricing in the local marketplace, and now matches their search to relevant inventory for participating local franchise dealers.”

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KBB: September Auto Sales Expected to Dip Nearly 2 Percent

Irvine, Calif. — New-vehicle sales are expected to decline 1.8 percent in September to a total of 1.17 million units, according to Kelley Blue Book, provider of new- and used-car information.

“September 2013 new-vehicle sales represent the first year-over-year drop since May 2011, due to slower retail sales, two fewer sales days in the month, and this year’s Labor Day sales included in August 2013 totals,” said Alec Gutierrez, senior analyst at Kelley Blue Book. “Despite the cool down this month, Kelley Blue Book forecasts sales will remain on track to exceed 15.6 million units in 2013 because of strong product introductions from automakers.”

This month, new light-vehicle sales, including fleet, are expected to hit 1.167 million units, down 1.8 percent from September 2012 and down 22.2 percent from August 2013. The seasonally adjusted annual rate (SAAR) for September is estimated to be 15.7 million, up from 14.7 million in September 2012 and down from 16 million last month. Retail sales are expected to account for 85 percent in September.

Honda will continue its momentum from a strong August last month, when it posted a 27 percent gain year over year. While calendar quirks this month will limit Honda to single-digit growth, two of its three core products, the Civic and CR-V, are leading their respective segments this year. Toyota also is expected to post small gains in September with its all-new Corolla, which will challenge the Civic for the best-selling small car this year. Domestic manufacturers are expected to post volume losses for the month; however, their combined market share of 44.4 percent will be slightly higher than last month and one year ago.

Compact crossovers will see the biggest growth of any segment, as sales are up 21.7 percent so far this year, fueled by redesigns of the Honda CR-V, Toyota RAV4 and Subaru Forester. While housing prices are starting to level out, housing construction and sales remain up, helping pickup truck sales accelerate into the fall season when sales are typically strong.

“In September 2013, Kelley Blue Book expects compact cars to surpass mid-size cars as the leading segment for the first time since June 2011,” said Tim Fleming, analyst at Kelley Blue Book. “Over the past three months, compact car sales have soared 17.8 percent on the strength of the Honda Civic, Chevrolet Cruze and Hyundai Elantra, and the introduction of the new Toyota Corolla will bolster sales even more in this segment.”

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