Wednesday, April 10, 2013 | Edited by Daniel Moores
||Mid-Sized Sales Crown Up for Grabs
Altima, Fusion Emerge as Title Contenders
The Nissan Altima and Ford Fusion have entered the thick of the mid-sized sedan sales chase -- long a battle mainly between the Toyota Camry and Honda Accord -- leaving the rest of the pack a few laps behind.
The also-rans include the Chevrolet Malibu and Hyundai Sonata. A lackluster design has hampered sales of the Malibu, and short supplies have held back the Sonata.
Meanwhile, the Altima and Fusion have become legitimate threats to end the Camry's reign as the top-selling U.S. car. In the first quarter, the Camry, Accord, Altima and Fusion each posted sales of more than 80,000 units, enough to make them the top four cars overall.
Their next-closest mid-sized contender is the Malibu, whose three-month total of 49,179 puts it a distant 11th among all cars.
In March, each of the top four surpassed 30,000 sales, at least 60 percent more than every other mid-sized car. In other words, there is a clear distinction between the mid-sized haves and the have-nots.
"We now have a vehicle that can compete head-to-head with Camry and Accord," says Victor Benitez, general manager of Gus Machado Ford, which has two dealerships in the Miami area. "It's a good-looking car."
Benitez said each of his dealerships typically sells about five to eight Fusions a month, but in March one store sold 15 and the other sold 25. Fusion sales in his region rose 46 percent year-over-year, compared with a nationwide gain for the Fusion of 6 percent.
Overall, U.S. light-vehicle sales in March increased 3 percent from a year ago, to 1.45 million units. The seasonally adjusted annualized selling rate climbed to 15.3 million, from 14.1 million in March 2012. It was the fifth straight month above 15 million.
"The housing market continues to recover, business spending has picked up, and pent-up demand for vehicles is offsetting any drag from tax or federal spending issues," Kurt McNeil, General Motors' vice president of U.S. sales operations, said during a conference call.
In March, sales in the biggest and most closely watched segment of the car market, mid-sized cars, declined 3 percent. The Altima logged a rare victory over the Camry, which has been the top-selling car for 11 consecutive years, by a slim margin, 37,763 to 37,663.
Although the Accord finished third in March with sales of 36,504 units, Honda said it was the best-selling car on a retail basis, excluding fleets.
In a sign of how intense the competition has become, the Camry, which was redesigned in late 2011, already is the oldest of the four top contenders.
At this month's New York auto show, Jim Lentz, CEO of Toyota's North America Region, said he is "not sure we can do much more than 400 (thousand) Camrys" this year, acknowledging that the nameplate will likely lose market share as a result.
"We feel really good about our position following a late build-out of the '12 model," Bob Carter, Toyota Motor Sales' senior vice president of automotive operations, said during a conference call last week. "We are absolutely confident we will be the No. 1 (car) in the market in 2013."
Rebecca Lindland, an industry consultant with Rebel Three Media in Greenwich, Conn., said: "Toyota has demonstrated its willingness to spend some money on the hood. They would like to avoid that 'Toyota Camry usurped' headline, not necessarily at all costs, but certainly from a strategic standpoint."
One competitor that Toyota need not worry about this year is the Malibu, which was redesigned for the 2013 model year. Malibu sales were down 22 percent in March and 16 percent in the first quarter.
GM is rushing a refreshed version to the market this year in an effort to reverse that trend. The company also tried to juice sales by cutting as much as $770 off the car's price, and GM has idled the plant that builds the Malibu twice in recent months to reduce inventories.
Lindland said the Malibu ended up being overshadowed by the Fusion's "jaw-dropping" new look. Ford "raised the bar so much higher than people expected," she said.
GM officials noted that Malibu sales rose 25 percent from February -- total industry sales rose 22 percent month-over-month -- and that March was the car's best month since all trim levels except the Eco launched in August. They said Malibu sales in March 2012 were aided by discounts on the outgoing model.
"Clearly it's a very competitive segment, but it's really that month-over-month trend that we like right now," said Don Johnson, Chevrolet's vice president of sales and service.
The Sonata, which had about the same industry share as the Fusion in 2012, is down 14 percent this year, dropping it below the Malibu.
"Our dealers remain constrained on Sonata, which continues as one of the fastest-turning mid-sized cars in the industry," Hyundai Motor America CEO John Krafcik said in a statement.
Supply issues also could trip up the Fusion this year, although Ford plans to begin assembling the car at a second plant this fall. The Fusion is built in Hermosillo, Mexico.
"Record customer sales and particularly strong demand in California and Florida will begin to place some constraints on supply starting in the coming months, which is why we are adding Fusion capacity" at Flat Rock, Mich., Ken Czubay, Ford's vice president of U.S. marketing, sales and service, said during a conference call last week.
"Our fastest-turning area in the country for Fusion continues to be California, with Fusion spending just 14 days on dealer lots."
The crucial mid-sized sedan sales race, with 2013 first-quarter sales and change from 2012:
Toyota Camry, 100,830, -4%
Honda Accord, 88,427, +45%
Nissan Altima, 86,952, -10%
Ford Fusion, 80,558, +26%
Chevy Malibu, 49,179, -16%
Hyundai Sonata, 47,285, -14%
Kia Optima, 38,813, +10%
Chrysler 200, 36,885, +17%
Dodge Avenger, 32,047, +48%
VW Passat, 25,909, +6%
(Source: Automotive News, 04/08/13)
||Smaller SUVs Appealing to Buyers
Pickups are helping to drive this year's auto sales growth, but another member of the light truck vehicle segment is also enjoying a pretty good 2013.
Compact crossovers -- like the Ford Escape, Honda CR-V and Toyota RAV4 -- grew at a faster rate than the overall industry through the first three months of this year.
These small SUVs are largely favored over the gas-guzzling full-size SUVs that were the norm a decade ago. Based on compact-car platforms, the new crossovers offer the fuel efficiency of a small car and much of the flexibility of a larger SUV.
Some automakers are trying to stay ahead through larger incentives, while others have added features to differentiate their offerings.
"It's a real sweet spot in the marketplace," said R.L. Polk & Co. analyst Tom Libby in a telephone interview.
"It's the right combination of functionality and size and gas mileage."
Sales of small SUVs totaled about 450,000 during the first quarter of this year and made up 12.1 percent of all new-car sales, according to Kelley Blue Book. That's up from 11.2 percent during the same period last year. And the crossovers have nearly doubled their market share from 2007, when they claimed 6.7 percent of the market.
Leading the charge through March is Ford Motor Co.'s all-new Escape. The Dearborn automaker sold nearly 73,000 Escapes during the first quarter according to Autodata Corp. That's up 25 percent compared to last year, and was the best quarterly stretch in the Escape's history, which dates to 2000.
Ford's gain has come at the expense of foreign automakers Toyota Motor Corp. and Honda Motor Co. Ford this year has overtaken Honda's CR-V in the segment; CR-V sales are down 12.4 percent this year to 65,374. Sales of Toyota's RAV4 are up 3.9 percent to 41,413.
Ford has made most of its gains with the Escape in California -- prime Honda and Toyota territory -- with sales up 50 percent there compared to a year ago.
Incentives lure buyers
Automakers in the small SUV segment are luring buyers with heavy incentives, said Jesse Toprak, vice president of market intelligence at TrueCar.com.
Ford is still relying heavily on sales incentives for its Escape, though not as much as in past years. Data from TrueCar.com show that Ford put an average of $2,383 on the hood of Escape vehicles in March -- down 42 percent from the more than $4,000 it offered last March to boost sales of the outgoing Escape.
But Ford's rebates and special offers are still significantly more than Toyota and Honda. Toyota spent $867 in sales incentives for the RAV4 last month, down 59 percent from the $2,114 it spent last March. Honda spent $923, up about 35 percent compared to the $685 it spent the same month a year ago.
Alec Gutierrez, senior analyst at Kelley Blue Book, said special offers have aided Escape sales, but are not the sole reason for the vehicle's success.
"Incentive spending is not going to lead any nameplate to the finish line," he said.
The Escape still has a higher average selling price than comparable vehicles in the segment, up 5 percent since last year to $28,659, according to Kelley Blue Book.
Nearly 1 in 5 customers opt for the more expensive Titanium Escape trim, which comes with a standard hands-free liftgate, a key option for the crossover.
The average selling price on the RAV4, which has an adjustable power liftgate on its high-end trim, climbed 3.9 percent to $26,822 during the same period; the average on the CR-V dropped slightly to $26,689.
Other brands stepping up
Ford, Toyota and Honda may be the big players among compact crossovers, but other brands are making huge gains, too.
Sales of Subaru of America's Forester, for example, are up 25.3 percent to 21,144 this year. Mazda's CX-5 sales are up significantly since last year and nearly hit 18,000 for the quarter.
Libby said those automakers with small SUVs will continue to see sales gains, though the market share for the vehicles overall may have topped out.
"There won't be many more entrants in the segment," he said.
Gutierrez believes the CX-5, along with Toyota's RAV4, have the most room to grow, though Mazda won't have the production capacity to match the volume of the segment's heavy hitters.
"The segment could grow as high as 14, 14.5 percent," he said. "Share has started to stabilize, but the overall outlook is very positive."
(Source: The Detroit News, 04/09/13)
||Introducing the 97-Month Car Loan
Last month Nakisha Bishop took out a loan to buy a $23,000 Toyota Camry and pay off several thousand dollars still owed on her old car. The key to making it work: she got more than six years -- 75 months in all -- to pay it off.
"I had a new baby on the way, and I was trying to keep my monthly payment a little bit lower to help afford child care," Ms. Bishop, a 34-year-old sheriff's deputy in Palm Beach County, Fla., said recently. She pays $480 a month for the 2013 Camry, just $5 a month more than the note on her old car. The car won't be paid off until her 1-month-old daughter is heading to first grade.
Ms. Bishop's 75-month loan illustrates two important trends rippling through the U.S. auto industry. Rising new-car prices and competition among lenders to attract borrowers is pushing loans to lengthier terms. In part, banks see the longer terms as a way to attract buyers, by keeping monthly payments under $500 a month.
The average price of a new car is now $31,000, up $3,000 in the past four years. But at the same time, the average monthly car payment edged down, to $460 from $465 -- the result of longer loan terms and lower interest rates.
In the final quarter of 2012, the average term of a new car note stretched out to 65 months, the longest ever, according to Experian Information Solutions Inc. Experian said that 17% of all new car loans in the past quarter were between 73 and 84 months and there were even a few as long as 97 months. Four years ago, only 11% of loans fell into this category.
Such long term loans can present consumers and lenders with heightened risk. With a six- or seven-year loan, it takes car-buyers longer to reach the point where they owe less on the car than it is worth. Having "negative equity" or being "upside down" in a car makes it harder to trade or sell the vehicle if the owner can't make payments.
Car makers have mixed feelings about long-term loans. They allow consumers to buy more expensive -- and profitable -- cars. But long loans may keep some people from replacing their cars, cutting into future sales.
Few lenders were willing to discuss the move to longer loans. Ally Bank, the largest car financier, declined an interview request but said in a written statement: "Generally, the current economic and consumer environment is more favorable for longer terms as compared with prior periods...The used vehicle market remains strong, current vehicle quality also helps to maintain appropriate values, and consumer credit profiles are improving."
JP Morgan Chase & Co. and other auto lenders declined to comment.
Credit availability has played a key role in the auto industry's ups and downs. During the financial crisis in 2008 and 2009, banks reined in lending dramatically, which made it hard even for consumers with good credit histories to buy cars. For the last three years, auto sales have been rising, helped as banks have eased credit standards and became more willing to offer longer term loans.
Experts say there is an appetite for more risk because banks see limited downside in auto lending. The delinquency rates on car loans are near record lows, and used car values are at record highs. And if a buyer defaults, the bank can repossess and sell cars with limited losses.
Melinda Zabritski, director of automotive credit for Experian, said the greater availability of credit is helping the surge in new car sales. The percentage of subprime loans isn't far below the record level of 2007, and the length of loans is growing, she said.
And while the length of the loan may seem long, the average age of a vehicle on the road today is 11 years. Vehicle durability continues to improve and used vehicles don't depreciate in value as fast as they used to.
With increased competition between the banks for business, offering loans longer than 72 months, or subprime loans is one way to compete for new borrowers. "Consumers tend to be monthly payment buyers. One way that lenders compete is to offer longer term loans," Ms. Zabritski said.
She said that people who get the longer loans tend to have good credit scores, and are buying relatively expensive vehicles.
Credit unions and independent banks have been more likely to use the long-term loans than finance companies operated by auto companies, Ms. Zabritski said.
Ford Motor Credit, the in-house lending arm for Ford Motor Co., has averaged between 59 and 60 months on new car loans for the past five years. Beyond the added risk, longer loans keep buyers from coming back as often, said Margaret Mellott, a spokeswoman for Ford.
"We don't want to keep buyers out of the showroom longer than that," she said.
The length of loans has come a long way since Lee Iacocca, then a Ford regional manager, helped pioneer auto loans in the 1950s. He became a management star by developing a '56 for $56 sales pitch. The idea: consumers could buy a 1956 Ford for 20% down and $56 a month. The loans were paid off in just 36 months.
(Source: The Wall Street Journal, 04/09/13)
Daily Sales Tip: Questions are the Answer
We've all been taught the difference between closed-end and open-ended questions. We've been given instructions on when to use which type question. Some trainers have given us formulas; others have given us specific questions to ask.
It's these detailed guidelines that seem to get many sellers in trouble -- that gets their questions to resemble Gestapo tactics rather than a discussion with a prospect.
So how do you use questions without intimidating or badgering?
The answer is actually quite simple -- don't interrogate your prospects. Instead of trying to figure out whether to ask an open-end or closed-end question here or which specific question to ask now, just ask the natural questions you'd ask your friends if you were trying to understand their problems.
Certainly there are different uses for different types of questions. Certainly there are times when an open-ended question will be more productive than asking a close-ended question. But ultimately, the goal isn't to ask the correct question type but to communicate with your prospect.
Communication is an art. We all can and need to improve our communication skills.
That being said, I've found that if I am sincerely interested in understanding my prospect's needs, my questions come naturally. They're the same questions -- delivered in the same tone of voice -- I'd ask a friend or my spouse if I were trying to understand their situation, and those questions and that tone of voice is hardly that of an interrogator.
Rather than being perceived as an unwanted interrogation, my questions are viewed as a sincere desire to understand, to communicate, to help. Rather than putting my prospect on the defensive, my questions usually cause the prospect to willingly open up more.
If you find you're uncomfortable with using questions for fear that you're putting your prospect on the defensive or you're coming across as a prosecutor cross-examining an unwilling witness, don't give up on using questions because questions are the answer to understanding your prospect's needs and how you can help.
Instead, give up on trying to use formulas or control the conversation and simply approach your prospect as a friend who has a problem you want to understand. Ask the natural questions that come to mind and you'll find your prospect will not only open up more easily, they will be more open to listening when it's your turn to offer a solution.
Source: Sales author/trainer Paul McCord