Friday, 15 August 2008

Auto Manufacturers Cutting Back on Lease Deals

Leasing deals on new vehicles are quickly becoming extinct. As we reported before, in 2008 the percentage of new vehicle sales that were lease contracts rose to 22%, from 19.3% in 2007. Dealers originally pushed leasing deals, in the face of declining sales, to get vehicles out of the lots and into the hands of drivers. Well, times they are a changing. Due to record high interest rates and Detroit’s current financial situation, leasing contracts can be seen less and less. Consumers are also faced with the new decision of whether a leasing contract is any longer a smart financial decision. Although leasing contracts previously allowed drivers to drive vehicles they couldn’t afford otherwise, now leasing contracts don’t carry the same benefits.

Chrysler has recently announced they were no longer writing lease deals following the first of August. Following close behind, GM and Ford have announced they too would cut back on new lease deals for new vehicles. Auto financing companies are rapidly losing money because of the decreasing residual value of SUV’s and large trucks. Ford saw the residual value of their SUV’s fall 25% last month, and this declining value has been the cause of over $8 billion in financing losses. The response from manufacturers has been to eradicate or reduce their leasing options. Chrysler dealerships can still lease their vehicles, however they will need a private company to deal with the financing.

New England and the Great Lakes are expected to be affected the worst, where leasing percentages are 50% and 70% respectively. Although this is bad news for habitual leasers, repair and service shops are expected to see increased profit because owners are now locked into their purchased vehicle, instead of a monthly payment and a brand new car every few years. Used car sales are also expected to rise, because consumers will choose to buy used, at a reasonable price, and will be able to keep their car at the end of the deal. Leasing may not disappear completely, but the deals will be harder to spot and much more limited.

Posted by industry at 9:20 AM in Auto dealer headlines
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Monday, 31 March 2008

Mercedes opens high performance AMG retail centers, pushing new C63 model

With the introduction of the 451-horsepower C63 AMG sedan next month, Mercedes-Benz is poised a capture high performance seeking drivers formerly captivated by BMW’s M3 and Audi’s S4 lineups of vehicles. Mercedes will open 27 dedicated AMG showrooms at existing dealerships in top selling markets, in an effort to spread the word about the AMG nameplate.

Dealers chosen to include AMG performance centers will receive special edition AMG models, as well as larger allotments of the entire lineup. These dealers will not only up marketing spend, but also send their staff to Germany for special training.

Source: Automotive News [Subscription required]
Image: Mercedes-Benz [2008 E63 AMG]

Posted by industry at 1:47 PM in Auto dealer headlines
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Monday, 21 January 2008

General Motors considering larger urban retail centers; would separate parts and service from showroom

At next month’s National Automobile Dealers Association convention in San Francisco, General Motors will reportedly detail a plan to consolidate major brands under single retail roofs in large urban areas. GM is concerned about maintaining competitive presence in cities, as some dealers have sold their businesses due to real estate values higher than the franchise values themselves.

The new approach would involve the consolidation of Cadillac, HUMMER and Saab into a core brand group, in the same way that Buick, Pontiac and GMC franchises have merged. Chevrolet and Saturn would continue to stand independently, leaving GM with four distinct product “lines.”

One drastic change could involve the separation of showroom and service center, as precious floor space would be used to display product. Service centers would presumably migrate to less expensive city outskirts – a phenomenon that has occurred in a few, albeit limited, markets. But would car buyers feel alienated by the dealers sending them down the road for oil changes?

Analysis: Combining GM brands may be sensible from a business stand point, but dealers should be wary about displaying different brands sharing the same architecture or platform next to one another.

Source: Automotive News [Subscription required]

Posted by industry at 8:11 PM in Auto dealer headlines
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Friday, 27 April 2007

Toyota’s U.S. dealership network to hold steady, despite company growth

Even with continued growth in the United States marketplace often in the double digits percentage wise, Toyota has no plans to vastly broaden its dealership network, according to Jim Press, Toyota’s North American President, in an interview with Automotive News. Instead, the manufacturer will allow its existing dealers to become more profitable and thus improve their business models. “Our dealers have made massive investments," remarked Press. "Adding more dealers just dilutes their investment."

At the beginning of 2007, Toyota-Scion dealers in the U.S. totaled 1,224 while Lexus dealers numbered 221, for a total of 1,445. At the start of 2006, Toyota Motor Sales was represented by 1,430 dealers in the United States, 1,215 of them being Toyota-Scion and 215 Lexus. However, during that period sales in the U.S. grew 12.5 percent, or 282,230 vehicles.

With only 15 more dealerships in the mix, existing retailers have shared in the company’s success. On average, Toyota-Scion stores sold 12.9 percent more units in 2006 than in 2005, while Lexus dealers grew at a more modest 3.7 percent by sales volume. Press emphasized that by encouraging dealer profitability, Toyota can ensure that resources are being put into customer satisfaction. The North American President envisions larger, more stable Toyota dealerships in the future with little employee turnover and highly efficient service departments.

Source: Automotive News [Subscription required]
Image: Toyota pressroom [Jim Press]

Posted by industry at 9:25 AM in Auto dealer headlines
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Monday, 5 February 2007

General Motors extends 100,000-mile powertrain warranty to Certified Used vehicles

Last fall General Motors announced that starting in the 2007 model year, all new light-duty vehicles will arrive with a five-year/100,000-mile powertrain warranty covering the more than 900 components comprising the engine, transmission, final drive assembly and transfer case (if applicable) of each car, truck, minivan or SUV. The move proves The General’s confidence in its current vehicle lineup, signaling the manufacturer’s recent quest for quality.

Just last week, GM announced it would extend the zero-deductible program to include Certified Used Vehicles ranging in model year from 2002 to 2006. All Buick, Chevrolet, GMC, Oldsmobile and Pontiac vehicles are included, as Cadillac, HUMMER and Saab Certified Pre-Owned vehicles are already protected by six-year/100,000-mile bumper-to-bumper warranties. Saturn also maintains its own CPO program but is expected to announce similar coverage conditions later this year.

Other GM Certified Used benefits are five-year/100,000-mile roadside assistance, a three-month/3,000 mile comprehensive warranty (or the balance of the original 39-month/39,000-mile coverage), a 117-point vehicle inspection and a three-day/150-mile customer satisfaction guarantee.

Analysis: General Motors’ new Certified Used coverage places the manufacturer above and beyond the domestic competition, at least in terms of mileage. Chrysler/Dodge/Jeep’s CPO powertrain warranty is eight-years/80,000-miles while Ford/Mercury/Lincoln’s stretches six years or 75,000 miles. Previously, the affected GM brands did not have separate engine/transmission/drivetrain support, and instead were covered by the bumper-to-bumper warranty only. Better yet, 100,000 miles matches the periods offered by Acura/Honda, Infiniti/Nissan and Lexus/Scion/Toyota.

Source: GM media
Image: GM

Posted by industry at 9:38 AM in Auto dealer headlines
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Monday, 15 January 2007

Smart USA searching for retail network, could market brand with non-DaimlerChrysler dealers

As indicated at this year’s Detroit Auto Show, Smart USA plans to begin U.S. sales of the second-generation ForTwo minicar early in 2008. The DaimlerChrysler subsidiary will start searching for retail outlets this month, and although DaimlerChrysler dealers with space to accommodate Smart will be given preference, non-Daimler retailers will be allowed to carry the minicar as long as separate facilities are built.

Smart is aiming for a dealer network of 50 to 60 to begin its United States campaign. East and west coast states, as well as the Sunbelt region, will be targeted first. Midwest metropolitan areas are also likely locations for the marque. UnitedAuto Group, Inc., a Detroit-based public dealership group, is currently the only distributor of Smart cars in America. By May or June, UnitedAuto is expected to have selected the dealers from approximately 400 in consideration now. About 1,200 initially applied. All Mercedes-Benz dealers in the U.S. remain eligible at this point in the selection process.

AutoNation, Inc., the largest U.S. dealer group, has applied for the Smart brand, while Asbury Automotive Group has also expressed interested. The Smart ForTwo will retail for less than $15,000. At just 8.8-feet long, the ForTwo reaches a top speed of 90 miles per hour and returns an estimated fuel economy of 40 miles per gallon in combined city/highway driving.

Analysis: Although a select group of customers will pounce on the Smart ForTwo when it becomes available, marketing the vehicle to the general public with a $15,000 price tag will be difficult, especially since it doesn’t achieve extraordinary fuel efficiency. Smart must also prove the safety of its vehicles, as American customers on fast-moving roadways have become accustomed to the structural cages of large vehicles.

Source: Automotive News
Image: Bob George, Dealer.com

Posted by industry at 8:41 AM in Auto dealer headlines
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Wednesday, 13 December 2006

Chrysler Group Certified Pre-Owned Vehicle November sales soar

Through the first 11 months of 2006, the Chrysler Group’s Certified Pre-Owned Vehicle (CPOV) sales have grown at a rate five times quicker than the overall industry’s CPO growth, which stands at a modest two percent this year. A record 107,271 Chrysler units have sold through November of this year via Chrysler’s “Five Star” dealer network, a 10-percent YTD increase. In November alone sales were 9,457, also up 10 percent compared with November of 2005.

A total of 2,876 Chrysler brand CPO vehicles were sold in November 2006 representing a 12-percent month-to-month increase compared with 2005. The Chrysler Pacifica crossover SUV – a vehicle that never really took off from new – jumped 80 percent.

November Jeep brand CPO sales climbed 31 percent month-to-month, totaling 2,618. Strong sales of the Jeep Grand Cherokee and Jeep Liberty, up 25 and 27 percent respectively, bolstered the off-road brand. Dodge brand sales actually declined marginally, as the 3,963 units accounted for a two percent drop.

Chrysler’s Certified Pre-Owned program requires each vehicle candidate be between model year 2003 and 2007, have less than 65,000 miles and pass a 125-point comprehensive inspection. Once certified, CPO Chryslers include an eight-year/80,000-mile powertrain warranty. To achieve “Five Star” status, dealers are required to undergo expansive evaluations covering operational processes, customer satisfactions surveys, salesperson and technician accreditation and dealership facilities. About 2,100 Chrysler dealers in the United States boast Five Star credentials, representing approximately half of the full dealer network.

Analysis: This is obviously good news for Chrysler, but it is even sweeter considering that many dealers have complained about strangely configured Chrysler models detracting from their new car sales. Chrysler refers to its CPO vehicles as “Brand Spankin’ Used,” and apparently more and more customers are feeling confident in purchasing a “new used” car. We should note that the eight-year/80,000-mile powertrain warranty takes effect when the vehicle is sold as new, so buying a 2004 CPO model with 40,000 miles leaves you five years or 40,000 miles.

Source: PRNewswire

Image: DaimlerChrysler media [2007 Chrysler Pacifica pictured]

Posted by industry at 11:14 AM in Auto dealer headlines
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Tuesday, 5 December 2006

AutoNation streamlines pricing process

With 272 dealerships nationwide, the largest U.S. car and truck retailer AutoNation, Inc. has simplified the price negotiation process in response to consumer demand, reports The Detroit News. Based on a successful pilot program tested in south Florida, potential buyers at AutoNation dealerships will be offered pricing sheets will detailed information regarding vehicle price, rebates, trade-in value, taxes, additional fees and financing options. This is a markedly simpler system than standard practice, in which customers must negotiate each element of the deal separately.

When tested in Florida the new program, titled SmartChoice, was shown to increase market share for the associated dealers. Many buyers now use the Internet to research vehicles, sending emails to dealers and waiting for “bids” in response. AutoNation says that while the price sheets will include low numbers there is still room for negotiation, although those windows are smaller.

Source: The Detroit News

Posted by industry at 8:24 AM in Auto dealer headlines
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Wednesday, 29 November 2006

Auto dealers' online advertising budgets on the rise, reports Cars.com

A recent poll conducted by Cars.com reveals that approximately 62 percent of auto dealers plan on increasing their online advertising budgets next year, while around 20 percent intend to maintain their current level of commitment. Only 18 percent say they will decrease online spending. Similarly, eMarketer.com has projected car dealer Internet marketing budgets to increase nationwide by 42 percent in 2007 compared with 2006. Approximately $1.9 billion will be spend this year on e-advertising, more than double the figure in 2004.

"Dealers increasingly rely on the Internet for the innovative, cost-effective marketing tools that no other medium can deliver to merchandise their inventory and build brand awareness," said Mitch Golub, president of Cars.com. "As more car shoppers spend more time on the Web looking for automotive information, dealers should invest in well-integrated Internet campaigns to reach shoppers across the full spectrum of their online activities. Effective programs include lead generation, display advertising, classified listings and search engine marketing to provide dealers with the greatest online reach and visibility."

Analysis: Vehicle sales still happen on showroom floors, but effective web solutions push more customers in the door and ultimately increase profitability. Golub emphasizes that consumers dedicate up to 30 percent of their “media time” to the Internet, rendering radio, outdoor and direct-mail campaigns less effective.

Source: Cars.com

Posted by industry at 9:27 AM in Auto dealer headlines
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Monday, 27 November 2006

Oddly configured Chrysler vehicles the bane of car dealers

Even with desirably-optioned vehicles, moving merchandise off dealership lots is tough business. Customers are increasingly aware of competitors’ offerings, discarding brand loyalty for value, convenience and luxury. When dealer inventories include poorly equipped models, the difficulty of selling cars and trucks is compounded further.

Such a challenge has afflicted many Chrysler dealerships lately, as dealers have accused the manufacturer of building the wrong vehicles, at least in terms of options and price points. For example, a base-model 2006 Dodge Grand Caravan SE actually leases for six dollars more per month than a 2007 Dodge Grand Caravan SXT, the fully-loaded model. So by spending six fewer monthly dollars, the consumer gains power sliding doors, tri-zone climate control, aluminum wheels, keyless entry and a power driver’s seat, plus gets in a 2007 model. Why would anyone opt for the 2006 Grand Caravan SE?

Chrysler dealer Thomas Vann of Team Hillside Chrysler-Dodge-Jeep in Hillside, Michigan has asked this very question. Since June of this year, Vann has stocked 13 base Grand Caravan and Chrysler Town & Country long-wheelbase minivans that he just can’t seem to sell. "There are no (lease deals), no keyless entry, no key fob, no power front chair," said Vann in an interview with Automotive News. "People say, 'I don't want that. I'd rather get the megapackage.' ” Vann purchased the minivans from Chrysler’s sales bank, meaning the cars were specified to manufacturer standards rather than customer demand.

Other vehicles have been problematic as well. The all-new Chrysler Aspen arrives almost fully loaded for $44,000 but does not include the optional navigation system, something buyers expect at that spending level. Base-model Jeep Grand Cherokees with the V8 engine have struggled compared with V6-powered models. “Loaded” Dodge Ram 1500 ST pickup trucks are too close in price to the much better equipped SLT models. Buyers would rather get into a no-options Dodge Ram ST, or pay the slight premium for an SLT variant. The generously equipped but still “base” model ST gets stuck in the middle.

Analysis: Certain factors contribute to the discrepancy between dealer inventories and customer requirements. As Edmunds.com president Jeremy Anwyl reports, undesirable models are often left over late in a car or truck’s product cycle, as the more appealing versions are purchased first. These unique models are built initially because manufacturers make commitments to parts suppliers to buy quantities of components, requiring certain vehicle configurations. However, the 2007 Chrysler Aspen’s lack of navigation cannot be attributed to either.

Chrysler has improved its sales bank procedure substantially since last year, allocating vehicles on a weekly basis, rather than monthly. The 508,724 Chrysler vehicles in dealer inventories at the end of October 2006 represent an 80-day industry supply, down from the 602,500 vehicles (95-day supply) at the same time last year. However, most of that decrease is a result of the 21 percent third quarter 2006 production cut. By the end of 2006, Chrysler hopes to reduce dealer inventory to 500,000 or less.

Source: Automotive News [Subscription required]

Image: Chrysler media [2006 Dodge Grand Caravan]

Posted by industry at 9:45 AM in Auto dealer headlines
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