June new car sales expected to dip: JD Power and LMC Automotive

DETROIT: June 2016 — New-vehicle retail sales in June are expected to reach 1,206,700 units, a 0.5% decline from a year ago on a selling-day adjusted basis, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive.

Retail sales through the first half of 2016 are projected to reach 6.8 million units, down 0.2% from the same period in 2015. With the sales slowdown expected to continue in the second half of the year, LMC Automotive is reducing its retail light-vehicle sales forecast for the year to 14.2 million units from 14.3 million units.

  • The seasonally adjusted annualized rate (SAAR) for retail sales in June 2016 is projected to reach 13.3 million units, down from 13.5 million units in June 2015.
  • New-vehicle retail transaction prices thus far in June are at an all-time high for the month at $31,089. The previous record was $30,202, set in June 2015. Incentives are also at a record high for the month of June at $3,278 per vehicle, $119 per vehicle more than the previous high in June 2015.
  • With record transaction prices, consumers are on pace to spend $37.5 billion on new vehicles in June, surpassing the record high of $35.2 billion for the month of June, set in 2015.
  • Increased fleet sales are expected to off-set slower retail sales, increasing total light-vehicle sales in June to 1,546,800, a 0.8% increase on a selling-day adjusted basis from 1,475,062 a year ago. Fleet sales are expected to hit 340,000, a 5.9% increase from 308,640 in June 2015 on a selling-day adjusted basis.
  • The SAAR for total sales is projected at 17.0 million units in June 2016, the same level as a year ago.
  • The lower level of retail sales has had an impact on the total light-vehicle market. LMC Automotive is maintaining its full-year forecast at 17.7 million, but cautions that volume may be at risk, as rising fleet sales may not be enough to maintain total volume.

J.D. Power and LMC Automotive U.S. Sales and SAAR Comparisons

  June 20161 May 2016 June 2015
New-Vehicle Retail Sales 1,206,700 units

(0.5% lower than June 2015)2

1,207,853 units 1,166,422 units
Total Vehicle Sales 1,546,800 units

(0.8% higher than June 2015)2

1,535,331 units 1,475,062 units
Retail SAAR 13.3 million units 13.7 million units 13.5 million units
Total SAAR 17.0 million units 17.4 million units 17.0 million units

1Figures cited for June 2016 are forecasted based on the first 16 selling days of the month.

2The percentage change is adjusted based on the number of selling days in the month (26 days in June 2016 vs. 25 days in June 2015).

John Humphrey, senior vice president of the global automotive practice at J.D. Power, said: “We have seen a slowdown in retail demand since April, posing a significant challenge to manufacturers on a volume basis. Despite sales slowing down, consumer spending remains at record levels due in large part to a continued shift from cars to trucks. The key going forward will be to what degree automakers are able to adjust production levels to slowing demand rather than relying on profit-damaging incentives to move inventory. This will be something to watch as the industry is nearing what is close to being the peak of an average cycle.”

Jeff Schuster, senior vice president of forecasting at LMC Automotive, said: “Year-over-year growth is evaporating, and while we are now expecting a slight contraction in retail sales, the total light-vehicle market should remain 1% higher than 2015. However, risks continue to mount for the second half of 2016, with 200,000-300,000 units of volume risk. If the selling rate averages 17.5 million units, which is higher than the projected 17.1 million-unit pace in the first half of the year, total sales for the year will end at 17.4 million units, or a decline of 0.3% from 2015.”

Dealers that embrace technology have better sales, sales experience: Survey

Porsche Ranks Highest among Luxury Brands; MINI Ranks Highest among Mass Market Brands for a Sixth Consecutive Year

The use of technology—i.e., tablets and computer displays—by dealers during the sales process can substantially improve customer satisfaction among new-vehicle buyers, according to the J.D. Power 2015 U.S. Sales Satisfaction Index (SSI) StudySM released today.

The study, now in its 29th year, measures satisfaction with the sales experience among new-vehicle buyers and rejecters—those who shop a dealership and purchase elsewhere. Buyer satisfaction is based on four factors: working out the deal (17%); salesperson (13%); delivery process (11%); and facility (10%). Rejecter satisfaction is based on five factors: salesperson (21%); fairness of price (8%); experience negotiating (8%); facility (7%); and variety of inventory (7%). Satisfaction is calculated on a 1,000-point scale. Overall sales satisfaction improves to 688 in 2015 from 686 in 2014.

Given an increasingly tech-savvy consumer, dealerships that integrate technology tools into their sales process deliver a superior customer experience. Dealers that fail to invest in consumer-facing technologies risk being trumped by competitors. According to the study, among both non-premium and premium buyers, use of tablets by sales personnel to perform such tasks as record customer vehicle needs, demonstrate vehicle features and display pricing information yields higher satisfaction with technology usage than when a tablet is not used (8.12 vs. 7.02 and 8.63 vs. 7.52, respectively, on a 10-point scale). Notably, handwritten price quotes have a negative impact on buyer satisfaction with technology usage, with a -0.55 point gap in satisfaction between non-premium buyers when this method is used and when it is not and a -0.45 gap between premium buyers.

Finance and insurance (F&I) products, such as extended warranties, pre-paid maintenance contracts and tire/road hazard protection are not only highly lucrative for dealers, but satisfaction is also higher among customers who are offered these options. For example, among non-premium owners, satisfaction is 46 points higher when a dealer offers them a pre-paid maintenance contract vs. when they do not (788 vs. 742, respectively), and among premium buyers the gap is 26 points (827 vs. 801). Moreover, when F&I product and pricing/payment options are presented on a computer or tablet screen, satisfaction is higher than when any other method is used, including printed materials, verbal quotes/descriptions and handwritten figures.

“With retail vehicle sales in the United States in 2015 forecast to reach 14.2 million units[1] and this positive momentum expected to carry into 2016, dealers face challenges in properly servicing a high volume of new-vehicle buyers who are increasingly tech savvy,” said Chris Sutton, vice president of the automotive retail practice at J.D. Power. “Dealerships should understand that customers want and trust technology and that it can enhance efficiencies. Dealers that disregard it may risk being left behind in 3-5 years. Customers are experiencing interesting uses of technology in many of their other retail transactions—and now expect this in auto.”

Gen Y[2]—the single most impactful generation on all markets due to numbers and purchase power—is among the buyers flocking to car lots and accounts for 29%1 of new-vehicle retail sales. Furthermore, average transaction prices for new vehicles exceed $30,000.1 “There is every incentive for dealers to use the most effective tools available to satisfy customers and build a relationship with them during the initial purchase process. This relationship should translate quickly into future service business. Implementing tools and processes that meet the needs of Gen Y will ultimately benefit all consumers,” said Sutton.

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Following are some of the key findings in this year’s study:

  • Sales Staff Remain Vital to Sales Experience:The most impactful sales satisfaction key performance indicator (KPI)—best practice—is interacting with a salesperson who understands the customer’s needs completely (+106 points). Such salespersons are good listeners, ask relevant questions and are able to deliver on customer requests. This KPI demonstrates that even with the growing prevalence of online communications and emphasis on an efficient transaction, the salesperson still plays a key role.
  • 5 of Top 10 KPIs Relate to Working Out the Deal:Among the most impactful KPIs are five that involve making customers feel comfortable (not pressured) and confident they are receiving the most transparent and up-front information to aid their decision-making while at the dealership. Delivering on these best practices improves satisfaction and builds loyalty and advocacy.
  • Gen Y Equally Interested in Safety and Protecting Vehicle Value as Other Generations:Among generational groups, Gen Y is as likely to purchase F&I products as other generations. For example, by generation, the following proportions of customers purchase tire/road hazard protection: Gen Y (21%); Gen X (21%); Boomer (20%); and Pre-Boomer (20%).

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Brand Sales Satisfaction Rankings

Porsche ranks highest in sales satisfaction among luxury brands, with a score of 752, improving by 14 points from 2014. For a sixth consecutive year, MINI ranks highest among mass market brands, with a score of 762, a 35-point increase from 2014.

The 2015 U.S. Sales Satisfaction Index (SSI) Study is based on responses from 27,831 buyers who purchased or leased their new vehicle in April or May 2015. The study is a comprehensive analysis of the new-vehicle purchase experience and measures customer satisfaction with the selling dealer (satisfaction among buyers). The study also measures satisfaction with brands and dealerships that were shopped but ultimately rejected in favor of the selling brand and dealership (satisfaction among rejecters), and was fielded between July and September 2015.

Learn more about the 2015 U.S. Sales Satisfaction Index (SSI) Study at http://www.jdpower.com/resource/us-sales-satisfaction-index-ssi-study

 

51% of car shoppers use mobile device in vehicle research

 

WESTLAKE VILLAGE, Calif.: — More than half (51%) of new-vehicle Internet shoppers use a mobile device—tablet or smartphone—to digitally conduct automotive research on the Internet to help them find the right vehicle, at the right dealer for the right price, according to the J.D. Power 2015 New Autoshopper StudySM released today.

The study analyzes how new-vehicle buyers use digital devices— tablets, smartphones and computers—to gather information prior to purchase, as well as which websites and apps they use during the shopping process. The study also examines what content new-vehicle buyers access during their shopping process and which content they find most useful.

For more information about the 2015 New Autoshopper Study visit http://www.jdpower.com/resource/jd-power-new-autoshopper-study

The proliferation of digital information accessible through mobile devices continues to change the way new vehicles are shopped for by consumers. Since 2012, the use of tablets for automotive shopping has increased by 83 percent and smartphone automotive shopping has increased by 70 percent. More than half (51%) of new-vehicle shoppers use a mobile device to gather automotive information prior to purchase. In particular, 34 percent of new-vehicle shoppers use a smartphone for automotive research and 33 percent use a tablet.

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“Outside of the home, the location where new-vehicle shoppers most frequently use their  smartphone to conduct auto research prior to purchase is at a dealership,” said Arianne Walker, senior director, automotive media & marketing at J.D. Power. “Nearly half (48%) of new-vehicle buyers that shop on a mobile device use their smartphone and 13 percent use a tablet for information gathering while at the dealership primarily to access vehicle pricing as well as model information, inventory searches and special offers and incentives.”

The manner in which new-vehicle shoppers locate the actual vehicle they seek is also going digital. Nearly one-third (30%) of new-vehicle shoppers find the vehicle they purchase on either a manufacturer website, a third-party website or their dealer’s website.
In addition, new-vehicle shoppers are initially contacting their dealer digitally. While a majority of shoppers make their initial contact by simply walking into a dealership, nearly one-fourth (24%) do so digitally by email, the dealer website, request an online quote, text, online forum or Facebook.

More of these new-vehicle shoppers are entering the process with a specific make or model in mind. Nearly half (49%) of new-vehicle shoppers know either the exact make or model they initially want and purchase it. This has increased dramatically from 2013 when just 43 percent bought the exact make or model they had in mind. This shift translates into a decrease in the number of vehicles these digital shoppers consider when they first began visiting dealerships to an industry average of 2.4 vehicles in 2015 from 2.6 vehicles in 2013.

Top Websites Used for Automotive Shopping

  • More than 9 in 10 of new-vehicle Internet shoppers visit at least one manufacturer brand website when shopping for a vehicle. Site visitors find manufacturer brand websites to be most useful for their model information and vehicle configurators.
  • While 83 percent of new-vehicle Internet shoppers visit at least one dealership website, 75 percent visit their selling dealership’s website.
  • Eight in 10 new-vehicle Internet shoppers visit a third-party site for automotive information.

o   The three most frequently visited third-party sites have remained consistent since 2012 (listed in alphabetical order): Consumer Reports, Edmunds.com, and Kelley Blue Book.

o   Among the 35 third-party sites measured in the study, TrueCar has experienced the largest increase in site visitation.

o   Compared with other automotive sites, third-party sites are found to be especially useful for vehicle comparisons and vehicle ratings/reviews.

The 2015 New Autoshopper Study is based on responses from more than 18,900 purchasers and lessees of new 2013 to 2015 model-year vehicles who used information gathered digitally during the shopping process. The study was fielded between February 6, 2015, and July 7, 2015.

 

Survey: Car buying takes twice as long as customers think it should

BY GERRY MILES

Too much time on my hands is not just the name of a hit song by the rock group Styx in 1981, it’s what a car buying customers feel while completing the purchase process.

People think they spend too much time in car dealers when buying a car.

People think they spend too much time in car dealers when buying a car.

According to a recent JD Power survey, customers feel buying a car shouldn’t exceed 2 hours from the time they walk into a showroom and drive off the lot in their new steed[1]; however, industry data finds the median amount of time actually spent completing a new-vehicle purchase is four hours,[2] according to the June 2015 PowerRater Consumer Pulse.

PowerRater Consumer Pulse is a monthly analysis developed jointly by J.D. Power and DealerRater. An alliance between J.D. Power and DealerRater integrates each company’s capabilities to gather comprehensive vehicle shopper feedback based on J.D. Power’s customer satisfaction research and DealerRater’s customer ratings and reviews of car dealerships.

Key Findings

  • More than two-thirds (67%) of luxury and 62 percent of mass market buyers indicate it should take no more than two hours to complete a vehicle purchase from the time they enter the showroom. Half of the buyers from each segment indicate the ideal duration is somewhere between one and two hours.
  • Slightly more luxury vehicle buyers than mass market vehicle buyers prefer to spend less than an hour in the dealership (18% vs. 13%, respectively).
  • According to the J.D. Power 2014 U.S. Sales Satisfaction Index (SSI) StudySM, buyers who use the Internet to shop for their new vehicle prior to visiting the dealership spend more time overall completing their purchase than those who do not research online.  In addition, buyers that used the internet are more than twice as likely to have compared prices from different dealers, and are more likely to know the expected price before they visit the dealer, than those that didn’t.

“Many retailers are expending enormous amounts of energy and capital to achieve a one-hour transaction time frame for their sales process. While this quest is noble―and customers do want to spend less time than they are currently―buyers tell us that one to two hours is a very reasonable time window,” said Gary Tucker, chief executive officer of DealerRater.

According to the J.D. Power 2014 SSI Study, most of a vehicle buyer’s in-dealership experience is currently spent on selecting a vehicle for purchase and negotiating the deal (60 minutes each, on average). This is followed by an average of 30 minutes to discuss and sign the necessary paperwork and an additional 30 minutes to take delivery of the vehicle. This leaves the remainder of the overall time spent waiting both before and after the paperwork process, a key area to focus on in terms of creating a more seamless and efficient process flow.

“From a generational standpoint,[3] Gen Y buyers spend more time negotiating than other generational groups , as they are more likely than the other generations to conduct research online prior to purchase and to have concerns regarding affordability, which emphasizes the importance of the negotiation phase for Gen Y,” said Chris Sutton, vice president, U.S. automotive retail practice at J.D. Power. “Both Gen Y and Gen X buyers spend less time taking delivery, likely because they need less instruction on the features and functionality of their new vehicles.”

“It’s important for dealers to be efficient with customers’ time. Customers will value specific parts of the process, such as finding the right vehicle, understanding features and controls and understanding how much and for what they’re paying,” Sutton said in a press release. “The dealer needs to strike an effective balance between educating the customer and efficiency.”

The 2014 SSI Study data finds that time spent in the dealership has a significant impact on overall customer satisfaction. While satisfaction among new-vehicle buyers who spend less than two hours in the dealership averages 861 on a 1,000-point scale, satisfaction declines to 844 among those who spend between two and three hours in-dealership and drops to 807 among those spending four to five hours to complete the purchase process.

Where Improvements Can Be Made

To improve customer satisfaction with the buying process, dealers should develop more efficient processes during the different phases of the buying process (vehicle selection, negotiation, paperwork and vehicle delivery). Reducing the amount of time a customer has to wait when purchasing a new vehicle is a key opportunity for dealers.

[1] Based on a survey conducted between May 5 and May 19, 2015, of 8,810 consumers who wrote a review on DealerRater.com after recently purchasing a new vehicle

2 Source: J.D. Power 2014 U.S. Sales Satisfaction Index (SSI) StudySM

3J.D. Power defines generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995-2004)

 

JD Power: May new car sales could hit 14.1M, tops in 2015…so far

WESTLAKE VILLAGE, Calif.: — U.S. new-vehicle retail sales, on a selling-day adjusted basis, in May 2015 are expected to reach their highest levels since August 2014, according to a monthly sales forecast from J.D. Power and LMC Automotive.

Retail Light-Vehicle Sales

The new-vehicle retail seasonally adjusted annualized selling rate (SAAR) in May is expected to be 14.1 million units, on par with the level reached in May 2014 and the first time the retail SAAR has reached 14.1 million units since August 2014.

New-vehicle retail sales in May 2015 are forecasted to reach 1,300,600 units, a 2 percent increase on a selling-day adjusted basis compared with May 2014. The sales pace of 50,000 units per day in May 2015 is the strongest daily selling rate in the month of May since 2004 when an average of nearly 53,000 vehicles were sold each day. Retail transactions are the most accurate measure of consumer demand for new vehicles.

U.S. Retail SAAR—May 2014 to May 2015  (in millions of units)

 

Source: Power Information Network® (PIN) from J.D. Power

“The industry continues to outperform prior-year levels with respect to retail sales and transaction prices,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. “The average new-vehicle retail transaction price so far in May is $30,428, on pace to achieve a new record for the month.” The previous record was set in May 2014 when retail transaction prices averaged $29,400.

The combination of strong sales and high transaction prices positions May to set a new record for the month for consumer spending on new vehicles at approximately $39.6 billion, according to the Power Information Network (PIN) from J.D. Power.  It would become the third-highest level of new-vehicle consumer spending in a month following August 2014 ($40.3 billion) and July 2005 ($39.7 billion).

While average gas prices across the nation have slowly climbed from January’s low of $2.12 per gallon to $2.72 per gallon so far in May, refinery constraints in California have driven fuel prices in that state up at a much faster rate. Regular fuel prices in California averaged $3.77 per gallon so far in Mayup from $2.55 per gallon in January—their highest level since September 2014.

High gas prices are contributing to increased hybrid and electric vehicle (EV) sales, which have accounted for 9.8 percent of all retail new-vehicle sales in California in May, their highest level since August 2014. Hybrid and EV sales have also started to recover nationwide, representing 3.5 percent of all retail sales in May, up from a low of 2.9 percent in February. In August 2014, hybrid and EV sales made up 4.3 percent of nationwide sales and 10.5 percent of retail sales in California.

Total Light-Vehicle Sales

Total light-vehicle sales in May 2015 are projected to reach 1,591,100, a 3 percent increase on a selling day adjusted basis compared with May 2014. Fleet volume is expected to hit 290,500 units, accounting for 18.3 percent of total sales, up from 17.6 percent a year ago.

 

J.D. Power and LMC Automotive U.S. Sales and SAAR Comparisons

  May 20151 April 2015 May 2014
New-Vehicle Retail Sales 1,300,600 units

(2% higher than May 2014)2

1,150,557 units 1,322,201 units
Total Vehicle Sales 1,591,100 units

(3% higher than May 2014)2

1,452,241 units 1,605,373 units
Retail SAAR 14.1 million units 13.4 million units 14.1 million units
Total SAAR 17.3 million units 16.5 million units 16.7 million units

1Figures cited for May 2015 are forecasted based on the first 14 selling days of the month.

2The percentage change is adjusted based on the number of selling days in the month (26 days in May 2015 vs. 27 days in May 2014).

Sales Outlook

LMC Automotive is maintaining its total light-vehicle sales forecast for the year at 17.0 million units and its retail forecast at 13.9 million units.

“May’s selling rate is making up for a slightly weaker April, and keeping the year on track to reach the elusive 17 million unit mark,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. “Over the next several months, all eyes will be on the timing of the expected increase in interest rates by the Federal Reserve, as the rate increase could have a significant impact on auto sales volume by year-end.”

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North American Production

North American production in April 2015 reached 1.49 million units, outpacing March and up 5 percent from April 2015. As a result, automakers built up some inventory as the industry heads into the summer selling season. May started with a 65-day supply, up from 59 days the previous month but still below the 69-day supply the industry was at during the same point last year.

LMC Automotive’s production forecast for 2015 also remains at 17.5 million units, a 500,000 unit increase compared with 2014. The continued popularity of SUVs is helping to drive up production numbers through April 2015, with SUV production in North America up 130,000 units, a 6 percent increase compared with the same period in 2014, with 70 percent of the increase in the midsize and large SUV segments.

Lexus deemed most dependable, again, in 2013 JD Power study

Lexus_ES_350

Lexus ES 350

Lexus RX SUV wins mark for fewest problems: First for SUV segment
Lexus ES 350 entry luxury sedan ranked highest in the Entry Luxury Car segment.
By Gerry Miles
 With many a person having quipped, “it’s good to be the king,” Lexus can rightly understand and puff out its swoopy “L” a bit more having been ranked as the vehicle with the highest dependability for the second straight year by J.D. Power and Associates for 2013.

The study tracks the number and type of problems owners have with their three-year-old vehicles.  The study lauded the Lexus RX with the fewest reported problems in the industry, which is the first time in the history of VDS that a crossover or SUV has achieved this accolade.

“There are many analyses conducted throughout the year, but VDS remains one of the most significant gauges of long-term vehicle quality and reliability,” said Mark Templin, Lexus group vice president and general manager.  “This award not only reflects real-world, long-term quality and dependability, it shows Lexus’ dedication and commitment to our customers.”

Lexus received two segment awards.

The Lexus ES 350 entry luxury sedan ranked highest in the Entry Luxury Car segment.   The Lexus RX had the fewest PP100 of any crossover or SUV in the study.
The Lexus GS 350/GS 460 finished in the top three of the Midsize Premium Car segment.

J.D. Power and Associates’ VDS finds long-term durability continues to be important consumer factor.  The number of problems an owner experiences affects their repurchase intent and vehicle’s retained value.