Isabelle Helms, VP research and Market Intelligence, Cox Automotive
Higher-priced cars are pushing U.S. consumers into the used car market, a new study from Cox Automotive has found.
The 2019 Cox Automotive Car Buyer Journey study suggests that budget-minded, time-strapped, tech-savvy U.S. car buyers are spending a higher percentage of their shopping time online and less total time in market as they hunt for their perfect ride.
And as the price of a new vehicle in the U.S. continues to increase – the average price paid for a new vehicle purchased in December 2018 was $35,671 – more buyers are turning to used-car lots to fulfill their mobility needs.
According to this most recent study, nearly two-thirds of car shoppers (64%) are now leaning toward a used vehicle.
Affordability is a top factor for vehicle buyers according to Cox Automotive. In 2012, approximately 54% of vehicles were priced under $30,000. That number has dropped to 35% today. Meanwhile, the number of vehicles priced over $50,000 jumped fourfold, from 6% in 2012 to 24% today. It comes as no surprise then that 48% of consumers feel that owning or leasing a vehicle is becoming too expensive, up from 42% in 2015.
The higher new-car prices are due, in part to recent tariffs, which Cox Automotive calculates has added 2% to the sticker.
“Initially, tariffs were on steel and aluminum sourced worldwide, including from trading partners in Mexico and Canada,” Cox reports. “Later tariffs affected many Chinese components, especially electronics on new vehicles. Luxury cars and crossover vehicles are heavily dominated by imports and are particularly sensitive to tariff legislation. The added expense and uncertainty of additional tariffs are being closely monitored in 2019.”
Other recent Cox findings show that 70% of consumers who purchased a vehicle from a franchise dealer did not return to that dealer for service business in the subsequent year.
“They are taking their service business elsewhere,” said Isabelle Helms, vice president of research and market intelligence at Cox Automotive. “That’s a big missed opportunity for dealers and with 49% of dealership profitability coming from fixed operations, service leakage is just not something they can afford long term.”
The value of the lost revenue for dealerships has been pegged at $266 billion a year, approximately $15.9 million annual lost revenue per franchise dealer in the U.S.
The most common reasons for not returning to the dealership had to do with the location of the dealership (not convenient for the consumer), the cost of repairs, and the fear of being overcharged for parts and labour.
“Consumers will travel far to buy a car, but not to service it,” Helms said. She pointed out, however, that with enhanced services, 60% of consumers said they’d be willing drive further for service, and 54% said they’d even consent to pay more.
Those enhanced services include:
- The ability to review and approve estimates electronically
- Video or photographic evidence of recommended service
- The provision of ride sharing or loaner cars
- Valet service
- Online bill payment.