Wednesday, August 31, 2011 | Edited by Daniel Moores
||Per-Dealer Sales on Track for Highest Level Since '07
Higher Throughput Means Bigger Profits This Year
The number of new-vehicle sales per dealership, also known as throughput, is expected to increase this year thanks to two years of sharp declines in the number of dealerships and an uptick in sales.
Throughput is on track to hit 711 units this year. That would be the highest since 2007, when higher sales volume was divvied among more dealerships, according to the Detroit consulting firm Urban Science.
The projection for this year is based on a national count of 17,725 dealerships as of July 1 and assumes full-year 2011 U.S. light-vehicle sales of 12.6 million units, as forecast by J.D. Power and Associates.
The higher throughput means higher profits for dealerships.
"I think the dealers in general are in better shape to weather another downturn if there is one," said John Frith, vice president of retail channel solutions at Urban Science.
And the growth in sales per dealership comes despite a steady decline in the average number of franchises at each dealership, which Frith links to the factories' push for exclusive franchise outlets.
The average number of franchises per dealership peaked at 2.2 in 1999.
As of July 1, the average dealership housed 1.7 franchises.
Average throughput per dealership was 771 in 2007. The figure tumbled to 660 in 2008; 564 in 2009; and 656 in 2010.
Higher light-vehicle sales and an improved economy also led to a slight increase in the U.S. dealership population, mostly domestic-brand stores.
The dealer count grew by 0.4 percent, as 66 rooftops were added during the first half of 2011.
That puts the industry on track for its first annual increase in more than a decade.
(Source: Automotive News, 08/29/11)
||Shopping Around the Best Bet for Vehicle Financing
Give credit where credit is due: Financing for auto customers is a lot easier than it was less than three years ago.
"We have ample credit available," says Marc Cannon, senior vice president of AutoNation, which owns the country's largest auto dealership network. "And it continues to improve."
That wasn't the case in 2008 and 2009. Financing institutions, stung by loans made to customers who defaulted, tightened restrictions that limited who qualified. This was a major reason why new vehicle sales tanked during this period, and used vehicle sales rose -- people couldn't finance a new car, and often had to buy a used vehicle either with cash or loans from a "buy here, pay here" used car dealership.
How bad was it? Claes Bell, banking and auto reporter for Bankrate.com, an online clearinghouse for consumer financial information, cites a survey taken in December 2008, the height of the financial crisis, that says the approval rate for new auto loans was just 46.3 percent.
"Now, it's way up," Bell says, to 74.5 percent, citing the same study from June of this year. And while new vehicle sales haven't been as strong in 2011 as predicted early this year -- due mostly to the still-struggling economy, and the shortage of vehicles caused by the earthquakes and tsunami in Japan -- neither manufacturers nor dealers are complaining.
Interest rates have also come down. Bell points to the most recent survey by the Federal Reserve that pegs the average interest rate from a commercial bank on a 48-month new car loan at 5.81 percent in May 2011. The national average for 2007, for example, was 7.7 percent.
Bell says there are three central sources for new-vehicle credit: banks, credit unions and the auto manufacturers themselves. Which is best? It can vary with every purchase. For that reason, Bell suggests buyers shop for credit before they shop for a car or truck.
"That allows you to walk into the dealership in a stronger position," he says.
Dealers may offer financing through the manufacturer -- typically at rates discounted by a contribution from the manufacturer, to help its dealers move cars -- or from banks and credit unions that the particular store has a relationship with.
There is no right answer as to where to get credit, except for one: The lender that costs the least. Bankrate.com has some online tools that help survey loan rates, and figure up payment schedules. For instance, the site surveys banks and credit unions in geographical areas, and provides specific data as well as averages.
Dealers invariably have multiple outlets for credit, including area banks and their own manufacturer's financing arm. Chad Rogers, general manager of Classic Mazda and Holler Hyundai in Orlando, Fla., says that when the manufacturers are offering attractive low-interest deals, the majority of the dealership financing goes there, "especially the customers with the top-tier credit ratings."
Otherwise, his dealerships maintain close ties to several banks, and even credit unions are becoming more aggressive in seeking business outside their captive credit union membership. "We've had several credit unions reach out to us and ask to be considered as a finance source," Rogers says.
Indeed, credit unions should not be overlooked: Bankrate.com's Bell cites figures from a Datatrac survey from last March that said the average U.S. interest rate on a 60-month new car loan from credit unions was 4.12 percent, compared to 5.46 percent from conventional banks.
Not all attractive manufacturer-backed finance deals are on slow-selling, unpopular models, or models that are about to undergo a major design change in the next model year. This time of the season, low-rate financing might be offered to simply clear the 2011 inventory to make room for soon-to-arrive 2012s.
Example: The two best-selling cars in the U.S. in 2010, the Toyota Camry and -- finishing the year slightly behind the Camry -- the Honda Accord, both currently have low- or no-interest financing. The 2011 Accord has a 0.9 percent race for 24 to 36-month loans, and 1.9 percent for 37 to 60-month loans. The Camry has 0 percent financing for 36, 48 or 60-month loans, and may include $500 "bonus cash back."
There is, as with all these deals, fine print involved. Sometimes a vehicle must be purchased that is on the dealer's lot, and deliverty taken by a certain date to qualify. Often these deals "cannot be combined with other offers," as Toyota says, meaning that if there is, say, a separate rebate offered, you can't take that and the financing.
And part of the fine print from the Honda Accord offer is also typical: "Not all buyers may qualify. Higher rates apply for buyers with lower credit ratings." In other words, if your credit rating isn't very good, you may still qualify for financing, but not at the bargain advertised rate.
For vehicles that offer either a hefty rebate or low-interest financing, you'll have to do your homework to see which suits you best. The 2011 Chevrolet Malibu, for instance, offers 0 percent interest for a 60-month loan, or a $2,500 rebate. The 2011 Ford Fusion is available with 0 to 1.9 percent financing depending on the loan length, or a $2,500 rebate.
All these deals can vary geographically. Check out the manufacturer's website -- typically the manufacturer's name, like Ford.com, Toyota.com or Honda.com -- and they will ask for a ZIP code before the site will list special financing or rebates in a particular area. Sometimes, you can also find incentives that aren't publicized. Ford, for instance, has a $500 rebate for police officers who are members of one of two national police associations, and $500 for active or recently-serving military personnel.
The bottom line: Shop for credit just as you do a new car or truck.
(Source: Orlando Sentinel, 08/27/11)
||Panoramic Views Go Through the (Sun) Roof
More motorists want to let the sun in.
Giant panoramic sunroofs are becoming all the rage and buyers are showing a willingness to spend more than $1,000 for that open-air feeling.
Once associated with sporty cars, these huge panes of glass across the roof of family vehicles allow passengers in the second or third row to gaze up at the sky, even if they can't always open the roof that far back.
It is a profitable trend for carmakers, because panoramic roofs as an option can add $1,000 to $2,000 to the price of a new vehicle. The feature also adds to the residual value of the pricier vehicles. Kelley Blue Book is now gathering data on its contribution to the value of a vehicle, said Alex Gutierrez, KBB's manager of vehicle valuation, in Irvine, Calif.
Sunroofs in general "have always been big sellers and a profitable feature," said analyst Jim Hall of 2953 Analytics in Birmingham.
And they continue to increase in popularity -- as well as in size. What started as a feature in sporty sedans has become widespread. For the 2000 model year, automakers in the United States installed 3.5 million sunroofs, and 1 in 5 vehicles had a moonroof of some dimension, according to data from WardsAuto.com.
The figures have been on a steady rise. By the 2008 model year, almost a third of vehicles sold had a sunroof, with more than 5 million installed. Vehicle sales as a whole fell for the 2010 model year, but the percentage of cars with a sunroof increased.
The popularity spawned these new giant multirow versions, complete with a sun protection factor of as much as 50 -- far above recommended levels.
The glass is chemically engineered to transmit light, but not heat.
"The idea is more open air and the feel of more openness when you are in a vehicle," said Amy Marentic, Ford Motor Co. global marketing manager. "Some people like the idea of a convertible but don't want to go all the way."
Ford debuted its new "Vistaroof" in 2007 on the Ford Edge and Lincoln MKX. Glass spans the front and back seats, but only the front portion opens.
"We wanted it to be huge," Marentic said, and make a vehicle more fun to drive.
The feature is now on four vehicles, including the Ford Flex and new Explorer.
The Ford Mustang and Lincoln MKT offer a full glass roof that does not open. Highway driving under the stars "adds to the visceral experience of driving a Mustang," said Jim Owens, Mustang marketing manager.
While Ford expected its Vistaroof to be popular, executives say they were shocked by how many customers are ordering it.
In its first year, 40 percent of Edge buyers wanted Vistaroof and that figure has grown to 56 percent today, Marentic said. Already half of Explorer orders demand the huge roof.
Across town, General Motors Co. offers combination sunroof/skylights on the Buick Enclave crossover, LaCrosse sedan and Cadillac SRX and Escalade SUVs.
So far this year, 55 percent of Enclave buyers want the $1,400 feature and 47 percent want the $1,200 roof on the LaCrosse, said Buick spokesman Nick Richards.
"People like the open airiness it provides in the cabin," he said.
Cadillac makes the "ultraview sunroof" standard on most trim levels of the SRX and Escalade, so the take rate exceeds 90 percent.
About 80 percent of CTS sales include the $1,450 sunroof.
Chrysler Group LLC first offered a dual-pane panoramic sunroof -- it looks like two roofs and opens halfway -- on the 2011 Jeep Grand Cherokee last fall.
It is a $1,195 option on the Laredo X model and purchased by 1 in 10 buyers, said spokesman Rick Deneau. It is standard on higher trim levels.
More than a third of Chrysler 300 sedan customers are paying a $1,295 premium for one, Deneau said, and the take rate jumps to 70 percent on the 300C.
Similar panoramic roofs can be seen on Mercedes, Mini, Porsche and Audi models, and others.
"We are seeing more of them, but they are not yet universal," said analyst Hall, who fears that much heavy glass on the roof could compromise the structure of a vehicle over time. The glass roofs are not part of the main roof structure that helps provide rollover protection. Glass is treated to prevent injury from shattering, said Ford spokesman Wes Sherwood.
Automakers say they worked to ensure the vehicles are quiet, fun and safe to drive in the sun.
"We don't want passengers to be surprised with a sunburn," Marentic said.
(Source: The Detroit News, 08/30/11)
Daily Sales Tip: Getting Feedback from Former Customers
Getting feedback from defectors is important because of the unique insights it provides.
Your former customers know which areas you need to improve in order to get their business back. And your former customers can also give you very specific reasons why they left -- a view of your business you can't get anywhere else.
Source: Don Peppers, founding partner of Peppers & Rogers Group.