Overcoming economic uncertainty and the lingering effects of the Great Recession, the U.S. automotive industry in 2012 produced accelerated growth and profitability for dealers and other key industry players.
New car sales exceeded expectations by 1 million units, rising to 14.5 million. Used car sales, meanwhile, rose to 40.5 million units, a 5% increase from a year ago. Wholesale prices remained at historically high levels, and the rental industry earned record profits. At the heart of many of these positive developments was the smart use of technology, including digital tools that allowed retail customers to make more informed choices, wholesale sellers to remarket their inventory in multiple forums simultaneously, and wholesale buyers to make inventory management decisions anytime, anywhere from the palm of their hands.
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While it also means that those buying a new car will continue to get top value for their trade-ins, used car prices remain at historically high levels and aren’t expected to decrease any time soon.
The National Automobile Dealers Association (NADA) in Orlando, FL. predicts the average used car (up to eight years old) will cost $14,375 this year, which is down by just 0.8% from $14,500 in 2012. This is the first drop – however slight – in used car values since the market bottomed out in 2008, according to NADA figures. Pre-owned vehicle prices subsequently skyrocketed by a stratospheric 32 percent over the ensuing three-year period.
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The latest Consumer Reports’ Car Brand Perception Survey again shows that the perceived difference between brands is shrinking. Even with a slight year-over-year score shift, the top automotive brands remain Toyota, Ford, Honda, and Chevrolet.
However, newcomer Tesla is on the rise.For 2013, Toyota has a 15-point advantage with its 133-point overall brand perception score over second-ranked Ford. Toyota boasted a more dramatic lead in 2010, which faded after the company’s safety concerns and recalls dominated headlines a few years ago, but since then, Toyota has edged back up. Ford remains in a solid second-place (118 points), with Honda retaining third place (114 points), yet jumping 20 points over last year. The top six brands overall finished in the same rank order as in 2012. Based on data collected from a random, nationwide survey, the scores reflect how consumers perceive each brand in seven categories: quality, safety, value, performance, design/style, technology/innovation, and environmentally friendly/green. Combining those factors gives us the total brand-perception score. While the scores reflect a brand’s image in consumers’ minds, they do not reflect the actual qualities of any brand’s vehicles. This last year brought stability to much of the automotive industry. Bankruptcies, brand closures, and lackluster sales were history for some companies. Instead, we saw new models introduced emphasizing design and fuel economy. Also, there is an increase in car sales spurred by an aging national fleet. Yet, the brand awareness for many brands has declined, including BMW, Buick, Cadillac, GMC, Hyundai, and Nissan. It is harder for companies to compete for share of mind, a situation perhaps exaggerated in years dominated by election and disaster news coverage. In looking at how the brands rank, it is clear that it takes more than a single ad campaign or new product for most brands to connect with consumers and earn their favor. The rare exception is Tesla, a small, electric-car builder that has garnered awards for its new Model S sedan and made a notable splash in this latest survey. Tesla made the Top 10 list last year with an overall 42-point score, and this year, it again holds the 10th spot with a higher 55 points. The real party crasher this year is Dodge. With its 56 points, Dodge bumped Lexus from the best list, as that luxury brand saw its score rise just seven points to 50 points for 2013 from the previous year against Dodge’s 23-point gain. While most brands excel in select areas, counting on just a couple or a few factors for their points, Dodge made the cut this year with modest showings across the board. And that was despite Chrysler Corp.'s separating the Ram truck group from Dodge. Its strongest categories were performance (14 points) and design/style (13 points), with the weakest showing being environmentally friendly/green (3 points). Not all brands can be everything to everyone.
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After falling by a mild 1.1% in June, used vehicle depreciation tightened up even more last month. Prices for used units up to eight model years in age fell by just 1.0% in July, a figure substantially better than July 2012’s 2.6% loss and one less than July 2011’s drop of 1.6%.
Depreciation as a whole has remained very mild over the course of the past two months, and as a result, NADA’s seasonally adjusted used vehicle price index remained virtually unchanged at 123.5, up just a tenth of a point from June’s figure of 123.4. At a segment level, losses for the month were better than what is typically recorded over the period. Wholesale prices remained especially strong for large pickups, large SUVs, and midsize utilities, with each outperforming their respective car segments. After ticking up by a slight 0.2% in June, large pickup prices remained fixed in July, while the combined 0.6% drop in prices observed for the large SUV and mid-size utility segments was barely perceptible. As for larger losses, depreciation in July was led by compact cars at 1.8%, a figure nearly even with June’s 1.7% decrease and one much improved from the 2.7% rate of decline recorded from April –May. Depreciation in the luxury car segment picked up by more than half a percent compared to June to 1.7%, while mid-size van declines grew by a similar amount to land at 1.6%. Despite a 10% year-to-date increase in auction volume, compact utility depreciation remained steady at 1.1% for the second month in a row, while mid-size car prices fell by a similar rate of 1.2% (a sharp improvement from the prior three-month average of 2.7%). Luxury utility depreciation quickened a bit to 1.4%, up from June’s figure of 0.8%.
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