No doubt the economy has impacted the new car market. But have auto shoppers stopped looking at new cars altogether? Not quite, but their slide into what one auto website giant calls the “substitution effect” should send shivers up the spine of auto makers around the globe.
But some car makes are fighting back, using old-fashioned psychology to get back into the game.
Edmunds.com is out with some new data that shows “significant evidence” that the recession has turned new-car shoppers into used-car shoppers.
That’s not such a big surprise – common sense dictates that consumers tend to scale back on big purchases during tpugh economic times. The data supports that theory. According to Kelley Blue Book, car buyers are about twice as likely to use cash to pay for their new ride rather than finance the purchase, than they were only three years ago.
In addition, the Kelley study of 338 car consumers says that 67% of them want a used car over a brand new set of wheels. Overall, 62% of the survey respondents said they wanted to pay $15,000 or less for a new car purchase, which won’t be received as good news in Detroit, Berlin, and Tokyo – homes to some of the world’s largest car makers.
Consumers, it seems, could care less how the big car companies feel about it. "In-market car shoppers are taking a decidedly conservative approach to car buying right now, which we think can be directly attributed to low consumer confidence in the current economy," says Kelley Blue Book market analyst James Bell. "It seems people are re-assessing their financial situations and deciding to spend less, buy used and pay more often with cash.”
The Edmunds data is well worth reviewing, primarily for the underlying reasons why American car buyers have fallen under the spell of what Edmunds calls the “substitution effect.”