Auto Service World
News   July 21, 2006   by Auto Service World

Loans Lure Consumers in July


Low-interest incentive programs appear to be resonating with consumers, according to real- time retail transaction data from the Power Information Network (PIN), a division of J.D. Power and Associates.
To better reflect consumer demand for new vehicles, PIN data includes retail transactions only and does not include fleet sales.
Nearly 63 percent of all new-vehicle retail transactions in the first 16 days of July included a loan -up substantially from 57 percent in June and 55 percent in May.
General Motors’ 72-hour sale during the Independence Day weekend, in which it offered zero percent financing on most of its 2006 models and some of its 2007 models, was a key driver of the loan trend. Nearly 78 percent of GM’s retail transactions in early July included a loan.
Among the industry-wide loans in early July, more than 39 percent came with an annual percentage rate (APR) of less than 5 percent — up substantially from 27 percent in June and 18 percent in May.
“Low APR programs certainly caught on with the American public in early July,” said Tom Libby, senior director of industry analysis at PIN.
“Whether this will continue or is simply a short-term aberration due to GM’s promotion remains to be seen.”
With finance transactions capturing such a large piece of the new-vehicle market, leasing has dropped from 19 percent in June to just 16 percent of the industry in July, and cash sales have retreated from 25 percent in June to 22 percent in July.
Rebate penetration has declined as well.
Only 42 percent of all new- vehicle transactions in the first nine days of July included a customer cash rebate — down from 49 percent in June. The actual rebate amount has also dropped from $2,335 in June to $2,097 in early July. Prior to July, the average rebate amount exceeded $2,200 in each of the first six months of the year.
As finance transactions have gained in popularity, loan terms have been extended to keep the monthly payment down. In early July, the average loan was 65 months — up from 64 months in every prior month of 2006.
In addition, captive finance companies are taking a larger share of the retail financing pie, with their share climbing to 66 percent of all retail finance transactions in June after remaining below 60 percent throughout the first half of the year.
“New-vehicle retail sales were very strong during the first week of July, propped up to some degree by incentives,” said Bob Schnorbus, chief economist of global forecasting at J.D. Power and Associates.
“However, sales dropped off sharply in the second and third weeks. How the month will end depends on how high, and how well accepted the end-of-month incentive programs will be. Many consumers may have postponed their purchase to see if the end of the month will bring better deals.”
PIN’s automotive solutions are based on the collection and analysis of daily new- and used-vehicle retail transaction information from more than 10,000 automotive dealership franchises in North America.


Print this page

Related


Have your say:

Your email address will not be published.

*