Higher Used Prices Continue to Push Shoppers Toward New Models

First Up 09/13/12

September 13, 2012

On Fiscal Cliff, the Time to Act is Now
There is no more urgent priority facing this Congress than preventing the U.S. economy from going over the fiscal cliff on January 1, 2013. Failure to act will slow growth and kill jobs – at the worst possible time, writes Bruce Josten of the U.S. Chamber of Commerce in The Hill. That is why the U.S. Chamber sent a letter yesterday, signed by 298 business organizations – including AIADA – calling on the president and members of Congress to immediately enact legislation that averts America’s fiscal cliff. They must prevent a devastating combination of historic tax hikes and ill-designed spending cuts from automatically taking effect at the end of this year. Click here to read the letter. The nonpartisan Congressional Budget Office and other leading economists warn that, if these tax increases and spending cuts take effect, they will plunge our economy back into recession in 2013 and could drive unemployment back up to above 9 percent. The time to act is now. The onset of harm to the economy will not wait until year-end. For AIADA Chairman Ray Mungenast’s take on the issue in a recent blog post, click here. To read the rest of Josten’s column urging Congress and President Obama to address the fiscal cliff, click here.

Next Safety Step: Cars Talking to Each Other
Our cars, like our homes, are supposed to be domains where we can enjoy a degree of privacy, free from the prying eyes, ears and voices of government, business, and law enforcement. A vehicle can also do something a home cannot; take you wherever you wish to go without anyone else knowing the where, why, or what for. However, as most consumers realize, the era of the smart car is already upon us, writes John McCormick at The Detroit News. Increasingly, vehicles on sale today can save us from our driving errors by the use of technologies like lane departure warning, blind spot warning, and similar crash avoidance systems. In everyday driving, vehicles record reams of data. What cars do not do yet is communicate that information, whether the communication is to other vehicles or to a central database. But that time may be coming. Just starting in Ann Arbor, Mich., is an 18-month government sponsored project, where 3,000 public and auto industry vehicles will be equipped to communicate with each other and to a road infrastructure system in a real-world environment. Click here to read more about the project as well as the future of vehicle technology.

Savvy F&I Managers Match Menus to Their Customers
More finance managers are willing to mix and match their F&I menu packages as well as sell a la carte products tailored to a customer's needs and budget, reports Automotive News. Dealers say F&I customization is driven by potential regulatory scrutiny as well as building long-term customer loyalty and boosting F&I profits. In a recent informal survey by Automotive News, 81 percent of dealership respondents said they are tailoring F&I product presentations to individual customers more now than they did five years ago. And about 70 percent of respondents said F&I sales are up as a result. At one time, aftermarket products were sold mainly through the practice of step selling, that is, pitching one product at a time. Some stores still rely on that method. But in the past decade or so, many dealerships have switched to a menu selling process, in which all F&I products are presented to customers bundled in variously priced packages, as a way to boost product sales and F&I profits. Some finance managers now are willing to unbundle those packages and re-package them to better accommodate a customer. Click here to read more about changes in F&I offerings.

Where Owning a Car Takes the Biggest Bite Out Of a Driver's Income
Though the average sticker price slapped onto the window of a new car stands at around $30,000, Forbes reports that same vehicle will consume more of an average household’s income – much more in some cases – depending upon the state in which a motorist lives. According to the recent “Automotive Misery Index” conducted for Car Insurance.com, Mississippi residents pay the largest percentage of their annual paychecks to own a vehicle, with those living in New Hampshire the least. The survey weighed fuel costs (based on local gas prices and the average yearly number of miles residents drive) and insurance premiums relative to each state’s average household income. With ownership costs based on a 2012 Honda Accord EX sedan the spread between highest and lowest-cost states was found to be as much as $2,000 a year. “A new Honda Accord costs pretty much the same in Bakersfield or Biloxi,” says CarInsurance.com managing editor Des Toups. “But keeping it on the road will hurt a lot more in Mississippi.” Click here to read more and see which state drivers are paying the biggest chunk of change to keep their vehicles on the road.

Higher Used Prices Continue to Push Shoppers Toward New Models
Kelley Blue Book Market Intelligence’s Quick Stats Poll for August found that many consumers now believe that foregoing a new-vehicle purchase and opting for a lightly used-newer model may not always be the wiser or thriftier purchase decision, as it has been in the past. According to Auto Remarketing, when asked if higher used-vehicle prices have prompted them to consider purchasing new instead, more than half of KBB.com shoppers who took the poll – 53 percent to be exact – confirmed this sentiment to be true. “Shoppers must have taken notice of used-car values creeping into new-car territory this year, and did the math to recognize the small price margin,” analysts surmised. Although the used-vehicle market has softened in recent months, Kelley Blue Book pledged to keep a close watch on consumers’ sentiment toward purchasing new versus used models. “With the invasion of more affordable, new fuel-efficient vehicles, there was curiosity if this had any influence on used-vehicle shoppers,” analysts explained. “It may have, as 44 percent of KBB.com shoppers now considered purchasing new due to the large increase in available fuel-efficient models,” they continued. Click here for more on the price difference between new and used vehicles and how it is influencing car buyers.

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