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CNW: Attractive Deals Lift Lease Penetration by Double Digits

BANDON, Ore. — Pushed by the availability of short-term deals that CNW Research president Art Spinella called “incredible,” the lease penetration rate for the first half of August was greater than 25 percent, a double-digit increase from a year ago.
Specifically, lease deals commanded a 25.86 percent share of the market from Aug. 1-15, compared with 21.3 percent during the first 15 days of August 2009.

Spinella also pointed out that several of the short-term leasing deals available include zero-percent financing and “significantly higher-than-book residual value projections.”

Continuing on to look at the overall new-vehicle market, there were 560,734 units sold during the first half of August, a 3.7-percent increase compared with 540,869 new vehicles sold in the same period of 2009.

CNW projects that August 2010 sales will likely hit about 1.31 million units.

“(With) total industry sales in August of 1.29 to 1.34 million units, the auto market could eke out a meager 3.7 percent gain over the same month of ’09, but a significant 20-percent increase over July,” Spinella noted. “The full year, however, still looks like 11.2 to 11.4 million.”

Traffic Woes

Moving along, an area which Spinella said remains “of major concern” is softer traffic at dealerships. Through Aug. 15, used-vehicle monthly traffic was down 3 percent year-over-year, while new-vehicle traffic down 4.6 percent compared to the first 15 days of August 2009.

The new-vehicle dip is consistent with what that side of the market has seen all of 2010 so far. That said, the 3-percent slowdown on the used side is significantly less steep than 10.8-percent traffic downturn so far in 2010, Spinella pointed out.

Pricing Trends

Next up, CNW looked at pricing trends. In the first half of August, the average MSRP showed almost a 9-percent climb from full-month August 2009 to $32,692. This marked at 7.39-percent gain from July.

After adjustments were made for incentives, the industry’s average core transaction price in the first half of August was $26,994, a hike of 19.8-percent from full-month August 2009 and a 1.58-percent sequential rise.

“As pointed out last month, the increase in the average sticker price of vehicles being sold is a harbinger of solidifying profits for automakers, especially since total discounts (from both manufactures and dealers) falls,” Spinella noted.

Compared to full-month August 2009, total discounts fell almost 24 percent to $5,698, which marks about a 4-percent dip from July. Dealer discounts dipped 32.53 percent from full-month August 2009, while OEM incentives fell almost 16 percent.

“Discounts from dealers are down by nearly a third compared to a year ago putting retailers and retail superstores on track to solid profitable quarters and boding well for fewer stores closing during the rest of the year,” Spinella explained. “This is especially positive news for the public retail chains such as AutoNation.”

He continued: “Manufacturer incentives are also down versus a year ago, as well as last month. Even including the subsidized lease deals being promoted, auto companies have been able to shave last year’s incentive level by 16 percent and bringing total manufacturer incentives down to below 10 percent of MSRP — a first in years — and a full three points below the year-ago level.”

Pent-Up Demand

However, another area that is still problematic, according to Spinella, has been pent-up demand. In July, pent-up demand was at 103,500 vehicles, compared with the 39,400 shoppers who delayed purchases in the same period of 2009.

Not only have the figures increased, but so has the delay time. In July 2009, shoppers were putting off purchases an average of 7.63 months. That ballooned 10.5 percent to 8.43 months in July of this year.

Article courtesy of

By Joe Overby, Staff Writer

August 25, 2010

John Paul Strong

John Paul Strong combines his two decades of automotive marketing experience with a team of more than 150 professionals as owner and CEO of Strong Automotive.

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