Third-Party Auto Website Executives Offer Insight on Business Models

Automotive Marketing Roundtable 2013 DSC_4280-SThird-party automotive website executives offered their observations about vehicle price transparency during a panel discussion at the October J.D. Power Automotive Marketing Roundtable (AMR) in Las Vegas, NV. More excerpts from the panel discussion that was moderated by Joel Ewanick, former automotive marketing executive and now managing partner of Global Auto Systems, are highlighted in today’s post.

 Moderator: Joel Ewanick, managing partner, Global Auto Systems, Inc.

Panel Members:

Seth Berkowitz, president and COO, Edmunds.com

Larry Dominique, executive vice president, TrueCar, Inc.

Jared Rowe, President, Kelley Blue Book

Alex Vetter, senior vice president, Cars.com

Joel: You’re very different in how you collect your data—so tell me Seth (Edmunds) why is your data so much better than their data?

 Seth (Edmunds): “I guess we see ourselves across the panel as being least competitive with Cars.com. We respect what they are doing: with the classifieds industry and what they have done in used cars—that’s not really our core space. That might change in the future. I think our biggest differences are with TrueCar and with Kelley Blue Book. . . While we were the company 20 years ago that introduced invoice price, and published it for the first time, we’re actually moving in a completely different direction. . . We are going to have dealers provide actual prices on individual vehicles and then we are going to tell what other people are paying. We have our Price-Promise program, now where you get those actual prices. . . Over the coming months, you’re going to see invoice stripped off behind warning labels where you have to click to get it because we believe that it’s not servicing people anymore and it creates confusion.”

Alex (Cars.com): “Putting a price on a transaction that we know is wildly complex creates distrust in the industry. The expectation that this is the price you are going to pay—is not something that any website [represented] here can actually deliver because so much goes into the pricing at the retail store. We rely on dealer participation to drive that pricing.” Continue reading ›

What Will the Auto Retailer Look Like in the Future—by 2020 to 2025?

Three auto retailer owner/operators discussed opportunities and challenges that lie ahead for dealerships today and in the near future, during a one-day New York Automotive Forum jointly sponsored by J.D. Power and Associates and the National Automobile Dealers Association (NADA) that was held at the Grand Hyatt Hotel before the New York International Auto Show (March 29 – April 7).

NY Auto Forum Audiencei-hnNQR2z-SAll dealer panel members pointed out that new-vehicle margin compression is a major concern. In addition, they said that regulation on the F&I side is a near-term concern as is the possibility of increases in interest rates. The panel members told moderator Glenn Mercer, a dealership consultant, that retailers already are challenged now in working with customers so they understand the sophisticated electronics in new vehicles. All agreed that retailing is changing—and that the Internet will be integral but that a physical dealership presence still will be required even in the future. Excerpts from the dealer panel discussion are highlighted in several posts during the next week.

Moderator: Glenn Mercer, Independent Consultant

Earl Hesterberg, President and Chief Executive Officer, Group 1 Automotive, Houston, TX; the fourth-largest public dealership group in the U.S., U.K. and Brazil (142 dealerships)

Jon Lancaster, Retired Toyota/Lexus Dealer, Madison, WI

Wesley (Wes) L. Lutz, Owner, Extreme Chrysler/Dodge/Jeep, Inc., Jackson, MI

Bricks and Clicks—How about Buying a Car on the Internet?

Glenn: We can start off with something that has been a theme throughout the day: “Clicks and Bricks.” At some point in time, is there a “Buy” button on the website?

Jon: I think a differentiator from other industries is: in many cases there is a trade-in. And that trade-in is certainly going to make it a lot more difficult to click the button and have the car show up because they have something they’ve got to get rid of on their doorstep. The technology is there. There’s no question that it can be done. As retailers, it’s up to us to create a relationship with people over the Internet.

Earl: No, I don’t think cars are going to be sold completely on the Internet. Of course everyone’s already doing all their homework there. In the state of Texas, we have 45 documents that need to be completed for at least some transactions with a trade-in. . . I don’t think that transaction in the near-term lends itself to an Amazon.com experience.

Wes: For me, sales are always about relationships. Maybe the technology has caught up with the fact that we could sell a car over the Internet but I don’t think we’ve learned how to establish that same type of loyalty and relationship with a customer over the Internet. Our repeat referral business is the heart of what we do. That’s because people like coming back. Continue reading ›

Sub-Compacts, Compacts Gain Momentum and Share in US Market

Grace Hamulic

Fuel-efficient, smaller vehicles are moving off U.S. retailer lots much faster in the first two months of this year compared with the same time period in 2011, due in part to the rise in prices at the gas pump—averaging more than $3.80 per gallon across the country.*

Sub-Compact Conventional vehicles, led by the Nissan Versa, averaged only 36 days on retailer lots before being sold this year, down from an average 92 days in the same period of 2011. Compact Conventional models, led by the best-selling Honda Civic, averaged 42 days before being sold vs. 66 days a year ago, according to our Power Information Network® (PIN) transaction data.

Both categories posted higher year-to-date sales, and together have gained more than 1 point of market share. Combined total (retail and fleet) sales for these two vehicle segments account for slightly less than one-fifth of the U.S. market’s deliveries—19.73% share vs. 18.66% a year ago (+1.07%). Continue reading ›

Lower Interest Rates Prevail, Trade-Ins on the Rise

Grace Hamulic

A majority of new-vehicle buyers or lessees (77.5%) received APRs on their purchase or lease deals below 5% in July this year, much higher than in the same month a year ago (71%). In addition, the average APRs were 4.30% for financed transactions and 2.68% for lease deals, slightly lower than the average 4.48% (finance) and 3.02% (lease) APRs in July 2010, based on our Power Information Network® (PIN) retail transaction data. In the first two weeks of August, 77.6% of buyers and lessees received APRs that still averaged below year-ago rates (4.35% for financed deals and 2.70% for lease transactions).

Additionally, more than one-half of all transactions in July this year included a trade-in (52.6%), which was up 4.4 percentage points from the same month last year, when only 48.2% of all deals included a trade. More than half of all deals in the first part of August this year have included a trade-in (51.6%).

Which models are most (or least) likely to have a trade- in? In July 2011, the model with the lowest trade-in percentage (only 12.2%) was the eco-friendly Nissan Leaf battery-electric vehicle (BEV), which suggests that buyers are likely purchasing it as a second (or even third) vehicle. On the flip side, another Nissan model and a Chevrolet model tie for the highest rate of trade-ins. Among models purchased or leased in July 2011, 76.1% of Nissan Titan and Chevrolet Avalanche deals included a trade-in. Continue reading ›

May Captive Penetration Dips; Lower Interest Rates Prevail

Grace Hamulic

Slightly more than two-thirds (67.4%) of new-vehicle transactions for all brands in May were financed through automaker captive finance arms—which was down more than 3 percentage points from 70.5% of new-vehicle deals in May 2010, according to our Power Information Network® (PIN) retail transaction data. In addition, a much higher percentage of new-vehicle buyers or lessees received APRs below 5% this year vs. the same month last year, up to 73.7% from 67.4%.

In light of the current inventory shortage of vehicles related to the effects of the earthquake and tsunami on production in Japan, we’re starting to see its impact on trade-ins. Compared with a year ago, the percentage of buyers and lessees with a trade-in on a new vehicle who have negative equity has declined to 21.8% from 24.5%. In addition, more than one-half (51%) of new-vehicle deals in May included a trade-in, which is up from 47.4% of transactions a year ago. Continue reading ›

Owners of Black Vehicles Most Loyal to Black Paint Color

We did some analysis of our Power Information Network® (PIN) retail transaction data to find out what color vehicles buyers are trading in for their new vehicles and discovered some interesting results. We already knew that black continued to be the most popular color choice for new vehicles in 2010, but we also found that owners of black vehicles were the most loyal to black as an exterior color choice for their new vehicle.

Grace Hamulic

More than one-third (36.4%) of black vehicles were traded in for a new one of the same color in 2010. We also found that it was an even higher percentage than in 2009, when 34.6% of those customers trading in a black vehicle purchased or leased another one.

Loyalty to White and Gray Also Increases

Buyer loyalty to white vehicles also was high—second only to black. In 2010, nearly one-third (32.9%) of those owners or lessees who traded in a white vehicle traded for another of the same color, up from 31.1% in 2009. Continue reading ›

Captive Transaction Percentage Climbs; Lease Percentage Rises

In October 2010, a majority of new-vehicle transactions for all brands were financed through automaker captive finance arms—69.0%, up more than 5 percentage points from 63.9% in October 2009, according to Power Information Network® (PIN) retail transaction data from J.D. Power and Associates. In addition, lower interest rates prevailed and more new-vehicle buyers or . . . Continue Reading Captive Transaction Percentage Climbs; Lease Percentage Rises