Letter from Lehel: Vehicle Affordability
Every year it seems like there’s a new threat to the auto retail industry. Self-driving cars, electric cars, rideshare companies…you name it. This year everyone is talking about vehicle affordability. Auto industry pundits worry that rising MSRPs will drive car shoppers out of the market, forcing them to delay purchases or elongate buying cycles.
Edmunds cites the average new vehicle transaction price as $37,000 and the average amount financed is $32,000.
Although that’s a lot of money to borrow on a depreciating asset, let’s keep things in perspective. Today’s vehicles come with more technology, especially safety-related technology such as rearview cameras and collision avoidance systems. Safety sells but it also costs money.
Additionally, high transaction prices are largely self-imposed by car shoppers. More than 70% of vehicles sold are utility vehicles and pick-up trucks, and many consumers are opting for more expensive trim levels. If a consumer really needs an inexpensive vehicle, they can purchase a sub-compact with no frills for around $15,000. Most Americans don’t want sub-compacts, which means affordability doesn’t seem to be a huge concern.
When affordability is a concern, there’s always used vehicles. Trends show that more consumers are opting to buy Certified Pre-Owned (CPO) vehicles, which is good news for dealers.
The prediction for 2019 new vehicle sales is 16.8 million, just a slight drop from the 17.3 million units sold in 2018. Sales will be spurred by the threat of higher interest rates and monthly payments, longer loan terms and plenty of incentives.
To ensure the trend of rising MSRPs works for them and not against them, dealers need to take a more proactive role in educating car shoppers about pricing, trade-in and financing options. Of course, video is the most effective way to accomplish this.
Educational videos can be shared on your website, YouTube, Facebook, other social media channels and in e-mail marketing campaigns.
Dealers should develop the following videos to build consumer awareness and trust, and to help car shoppers make a purchase decision they can live with:
- Safety features in your top-selling models
- Differences between trim levels
- CPO program highlights and guarantees
- Financing videos explaining interest rates and loan terms
- Trade-in valuation program and guarantees
Videos are highly effective tools for letting consumers know that your dealership is a trusted source for information—so don’t be afraid of rising MSRPs! A little education goes a long way to helping consumers feel more confident and comfortable with their purchase decision.