Despite scarcity and prices, some shoppers still want new over used
Even during this time of new-model inventory scarcity, recent research by Cox Automotive showed how adamant about purchasing a new vehicle some consumers remain instead of considering the delivery of a certified pre-owned model or other used vehicle.
Cox Automotive recently reported that 77% of new-vehicle intenders surveyed at the end of April are staying focused on the new-vehicle market, while just 23% of new-vehicle intenders are considering a shift from new to used.
And what’s more, that Cox Automotive research showed 42% of those new-vehicle intenders would be willing to pay more than MSRP for a new model.
“A vast majority of consumers surveyed are aware of the global microchip shortage and are expecting limited choice and higher transaction prices. Dealers are being transparent: ‘We’re short on inventory,’ they say, which is Latin for ‘You’ll be paying full price, plus some,’” Cox Automotive said in a Data Point that included the survey results.
Contained in a recent blog post by Cox Automotive’s Jonathan Smoke, the company’s chief economist noted that average incentives on new vehicles declined 5% from March to April, dipping to an average of $3,239 per vehicle. That’s also 25% lower than a year ago.
Smoke said incentives as a percentage of average transaction prices decreased to 7.9%, which was the lowest level since January 2015.
Smoke added that the average transaction price for new-model deliveries in April was $40,768, which was up 0.5% from March and 2.2% higher year-over-year.
Meanwhile, Edmunds shared some interesting data about how some consumers continue to pick new over used despite some characteristics that might make a CPO or used model appealing.
According to Edmunds, the percentage of consumers who paid above sticker price for a new vehicle climbed to 12.7% in April, compared to 11% in March 2021 and 8.1% in April of 2020. This is the highest level that Edmunds has on record dating back to 2002.
Edmunds analysts explained that consumers are paying well above list price because of a combination of unique market factors: The global chip shortage is severely constraining the supply of new vehicles, and automakers and dealers are less pressured to discount vehicles since consumer demand remains incredibly high.
Edmunds data showed that new-vehicle inventory available at dealerships nationwide was down by 48% by the end of April compared to a year earlier. Inventory of trucks was down by 64%, SUVs by 44% and passenger cars by 42%.
“New vehicles — particularly new trucks and SUVs — are basically the 2021 equivalent of toilet paper and hand sanitizer a year ago,” Edmunds executive director of insights Jessica Caldwell said in a news release. “Dealers and automakers are making good profits right now since consumers seem to be a bit more accustomed to paying more for goods in the past year, and new vehicles are no exception.
“Demand is staying strong as vaccinations ramp up across the country and Americans look to hit the open road in a new car, but as the chip shortage continues, there soon won’t be enough vehicles to meet consumer appetites,” Caldwell continued.
Perhaps the shoppers scanning your store website or actually walking your blacktop might be shifting toward your used inventory, especially when you consider what Edmunds senior manager of insights Ivan Drury mentioned.
“At the rate we’re going, it's going to be a lot tougher for car shoppers to find exactly what they want this summer,” Drury said.