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KBB Announces 2017 Best Buy Awards


IRVINE, Calif. — Kelley Blue Book today announced the winners of its 2017 Kelley Blue Book Best Buy Awards. The 2017 Honda Civic was named the Overall Best Buy of 2017, however, 11 other vehicles also took top honors for their respective categories.

“Kelley Blue Book editors went to the unprecedented choice of honoring the Honda Civic as the Overall Best Buy for the second year in a row because of the Civic’s unsurpassed all-around value,” said Jack R. Nerad, executive editorial director and executive market analyst for KBB.com. “It turns in very high marks in objective measures like resale value and cost to own, yet it also is a supremely satisfying car to drive and live with every day.”

Overall, the Honda brand took home four awards, with its new Civic also winning in the small car category. The Honda Accord and Pilot also won in the mid-size car and mid-size SUV/crossover categories, respectively.

The Chevrolet brand received the second-most Best Buy awards, with its Impala winning in the full-size car category and the automaker’s Tahoe winning in the full-size SUV/crossover category.

The 2017 Audi A4 was named the Best Buy in the luxury car segment, while the 2017 Porsche 718 Boxster took top honors in the sports/performance car segment. The best electric/hybrid was the 2017 Toyota Prius Prime.

In the small SUV/ crossover category, the 2017 Kia Sportage emerged as KBB’s Best Buy. In the luxury SUV/ crossover category, the 2017 Mercedes-Benz GLC was honored with the top award. And for the third year in a row, Ford’s F-150 received KBB’s Best Buy award.

Lastly, the 2017 Chrysler Pacifica received the best buy award for the minivan category.

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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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Kia Motors Recalls Nearly 87,000 Forte Sedans in U.S. Due to Fire Risk


Kia Motors is recalling 86,880 Forte sedans in the United States because a cooling fan resistor may overheat and melt, increasing the risk of a fire, according to documents filed by U.S. auto safety regulators, reported Reuters.

The recall involves certain model year 2014 Forte compact sedans and is expected to begin on Feb. 24, according to documents on the National Highway Traffic Safety Administration website.

Dealers will replace the cooling fan resistor and multifuse unit in the recalled cars, and owners of vehicles with a 1.8 liter engine will also have the engine control unit software updated, the documents said.

The South Korean automaker reported several incidents of engine fires that could be linked to the resistor but no accidents or injuries, the documents said.

A Kia Motors representative was not immediately available for comment.

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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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Nissan, Chrysler Lead in Beating Estimates for May Sales


General Motors Co. (GM), Ford Motor Co., Chrysler Group LLC and Nissan Motor Co. all reported U.S. sales that exceeded analysts’ estimates in May. GM and Chrysler said industrywide sales were stronger than projected, reported Bloomberg.

GM’s deliveries, helped by Chevrolet Cruze sedans and Silverado pickups, rose 13 percent to 284,694, the Detroit-based automaker said today in an e-mailed statement. That beats a 6.4 percent increase projected by the average of analyst estimates.

“The momentum we generated in April carried into May, with all four brands performing well in a growing economy,” Kurt McNeil, GM’s U.S. vice president of sales operations, said in the statement. The month marked GM’s best May in seven years and best since August 2008, the company said. Gains by GM suggest consumers are separating new models on the lot from the older small cars that make up the company’s 2.59 million recalled vehicles linked to at least 13 deaths.

GM with its new pickups, Ford with sport-utility vehicles and Chrysler with its Jeep brand were able to take advantage of a rising market buoyed by improved housing starts. The pace of U.S. home construction jumped in April to its highest level since November. Housing starts climbed 13.2 percent to a 1.07 million annualized rate following March’s 947,000 pace, the Commerce Department reported on May 16. Permits for future projects increased, a sign activity might accelerate in coming months.

Ford, Nissan

Ford’s light-duty vehicle sales rose 3 percent to 253,346 last month, the Dearborn, Michigan-based company said in an e-mailed statement. The automaker’s sales were projected to decline 0.2 percent according to the average of 10 analysts surveyed by Bloomberg. Nissan reported sales jumped 19 percent in May, beating estimates for an 11 percent increase.

Chrysler sales rose 17 percent to 194,421 vehicles in May, Auburn Hills, Michigan-based automaker said in a statement. The third-largest U.S. automaker was projected to report a gain of 14 percent, the average of eight analyst estimates.

“Our Jeep sport-utility vehicles and Ram pickups continued to do well in May as our dealers reported brisk May sales over five weekends and the Memorial Day holiday,” Reid Bigland, Chrysler Group’s U.S. sales chief, said in a statement. The Auburn Hills, Michigan-based automaker’s Jeep brand gained 58 percent while its Ram pickups rose 17 percent increase, the company said.

Industry Outlook

Both automakers forecast an annualized sales pace higher than the average pace of analysts surveyed by Bloomberg who projected a 16.1 million selling rate pace, in line with full-year projections.

GM forecast an annualized light-vehicle sales pace of 16.5 million while Chrysler forecast an annualized sales pace of 16.9 million, including medium-duty and heavy trucks, which typically account for at least 200,000 sales a year.

While U.S. auto sales exceeded 16 million from 1999 through 2007, domestic automakers weren’t consistently profitable. This time, pricing discipline and lower costs are producing steady income for Chrysler and GM, five years after their bankruptcies, and Ford, which financed its own restructuring.

Other Gains

Vehicle deliveries in the U.S. may have risen 6.5 percent to 1.54 million, the average of estimates compiled by Bloomberg.

Toyota Motor Corp. may see a jump of 8.1 percent, analysts said.
Honda Motor Co. may report a 4.5 percent increase.

The gains continue the resurgence of the U.S. auto market, half a decade after the near-death of the U.S. auto industry forced restructurings that led to fewer brands and factories and more flexibility in labor contracts. The automakers’ margins also reflect the financial impact of increased U.S. energy output, widely available credit and management’s resistance to the heavy discounting car companies long used to prop up sales at the expense of profit.

The result is a lineup of U.S.-made cars and trucks that compare favorably with vehicles made by Toyota, Honda and other foreign manufacturers — showing how far the industry has come since June 2009, when GM filed a government-backed bankruptcy one month after Chrysler’s Chapter 11 filing.

‘Different Time’

“Short of calling 2009 and bankruptcy a lucky break, it’s two different companies, different management, different products,” said Kevin Tynan, auto analyst for Bloomberg Industries. “It’s very easy for the consumer to look at it and say, ‘This is different; it was a different time and these cars are at least worthy of my consideration.’”

Testament to Detroit’s comeback is GM, which is growing even as it moves this year to recall 14 million vehicles in the U.S., including 2.59 million small cars no longer in production for a faulty ignition switch linked to 13 deaths — suggesting buyers see the flaws as a legacy of the past company, rather than a defining moment of today’s GM.

“There’s some risk associated with the recalls, but it hasn’t been evident in GM’s sales numbers so far,” said Jeff Schuster, senior vice president of forecasting for researcher LMC Automotive of Troy, Michigan. “The jury is still out, but at this stage, it’s not derailing their momentum.”

Now Detroit is producing some of the most competitive vehicles in a generation. Ford’s Fusion has been a critical favorite, closing the gap against top Japanese models in the competitive family-sedan segment. Chrysler’s Jeep, with its updated Grand Cherokee and smaller Cherokee, is outpacing the robust growth of the market for sports-utility vehicles. Grand Cherokee deliveries rose 13 percent to 18,068 and Chrysler sold 15,992 of its Cherokee, which debuted last fall. Chrysler’s Town & Country minivan rose 37 percent to 14,799 and the Dodge Grand Caravan, rose 10 percent to 14,232 deliveries in May.

Chrysler’s strength was its trucks and SUVS, as car sales fell 27 percent, hurt by the older version of the 200 and the outgoing Avenger. The 200 is being replaced by a thoroughly revamped model which began reaching dealers last month. Sales of the compact Dodge Dart rose 16 percent to 8,644.

Challenges Ahead

Plenty of challenges remain, including the arrival of upstarts like Tesla Motors Inc.’s sleek, electric Model S and Google Inc.’s steering-wheel-free driverless car.

More immediately, Detroit must navigate the rising tide of recalls that could threaten freshly rebuilt reputations. Total recalls in the U.S. have reached almost 23 million, the most since 2004’s 30.8 million. And June has just begun.

Even with recall-related risks and growing competition from the likes of South Korea’s Hyundai Motor Co. and Kia Motors Corp., the Detroit Three automakers are as capable as they’ve ever been in one of the world’s most fiercely contested industries, said Harry J. Wilson, a member of President Barack Obama’s Automotive Task Force that led GM and Chrysler through bankruptcy in 2009.

“The Big Three are holding their own and actually increasing share,” Wilson, now CEO of restructuring adviser Maeva Group LLC, said May 22 at a Brookings Institute forum in Washington, D.C.

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Kia K900 Takes Korean Brand into Upscale Territory


Via Detroit Free Press

Kia, which has made a name for itself as a value brand, is expanding into the luxury market with the 2015 K900 sedan meant to redefine how consumers view the Korean automaker.

“K900 is the beginning of a new era for Kia,” said Michael Sprague, executive vice president of marketing and sales, who was in Detroit Thursday to address the Automotive Press Association.

On another note, Kia is ending its sponsorship of the L.A. Clippers NBA team, in a move Sprague said “was an easy decision to make” after racist comments by owner Donald Sterling.

“We were all just horrified by what the owner of the Clippers said,” he said. “There was never any question. This is not something we want to be associated with.”

Kia will continue to support the NBA and about a dozen other teams.

But Sprague mainly wanted to talk about the new full-size luxury sedan.

Powered by a 420-horsepower 5.0-liter V8, the K900 went on sale in March, starting on the West Coast. It is being rolled out in the Midwest this month and should be available in Detroit shortly before launching in the Northeast, Sprague said.

“We need to change the perception of the brand in the marketplace,” said Sprague, who sees no reason why Kia can’t sell a $66,400 rear-wheel drive sedan targeted at males ages 45-54 with household incomes of $200,000.

“It will be a halo for the brand,” Sprague said of the car that is cousin to the Hyundai Equus.

The K900 is sold as the K9 in Korea and as the Quoris in the Middle East, China and some other markets. Sprague said the decision was made to go with K900 in North America because alphanumeric names are popular in this market.

After a strong 2012, Kia’s U.S. sales fell 4% last year, partially because it had down time associated with the launch of seven vehicles. Supplies were also strained because of a strike in South Korea.

The fresh lineup comes during Kia’s 20th anniversary of selling vehicles in the U.S. More new models are on the way, including the next-generation Sedona minivan, designed to appeal to those shopping for a crossover, slated to reach showrooms in the fall.

An electric version of the Soul will debut on the West Coast this summer and become available in the rest of the country early next year. Expanding into hybrids and electric vehicles “says we are a Tier 1 brand,” Sprague said.

The executive is also hoping the GT4 Stinger sports car concept shown at the North American International Auto Show in January will go into production. “We’d really like to see it on the streets of Detroit,” Sprague said.

The focus now is on quality, strengthening the brand and elevating the customer experience, Sprague said of the brand that has doubled sales and market share since 2009.

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