TRAVERSE CITY, MI – Price, value and “the deal” always will matter to car buyers, but their interest is expanding to other considerations, Tom Libby, an analyst and forecaster for data firm Polk, says in discussing future trends.
Consumers now and in the future will place a greater importance on vehicle quality, product cadence, expected cost of ownership, fuel economy and connectivity, he predicts. They also are placing more significance on how they are treated before, during and after their purchase.
Nevertheless, “Price always has been and always will be a key differentiator across all segments,” Libby says at the Center for Automotive Research’s Management Briefing Seminars here.
Incentives “are here to stay,” he adds. “There are many incentives, some of which the customer doesn’t even know about. They are an integral part of the transaction.”
Another constant is car buyers’ desire for value, taking into account the benefit and cost of a vehicle. “Value considerations always will remain,” Libby says. “Those makes that can provide the most value to their customers will win.”
Although some car buyers disdain dealership negotiations, those too “will continue to play a major role, in one form or another,” he says.
But Libby worries that many of today’s consumers are getting longer vehicle loans. Nearly 50% of current car loans have payback terms of five years or more. He calls that “ominous, because customers can get underwater fast.”
However, today’s low interest rates reduce the potential downside of longer loans, Paul Taylor, chief economist of the National Automobile Dealers Assn., tells WardsAuto. “A rate of 2.5% can reduce dangers.”
Auto makers enhance their position in the marketplace by being first with innovations and maintaining short product cycles, Libby says. Doing those things polish the brand image, something of an intangible in the minds of consumers.
“Customers may not mention brand image, but rarely is it not a key differentiator,” he says, citing examples such as Volvo’s safety image, Toyota’s reputation for quality and BMW’s standing in luxury performance. “Image is important at make and model levels.”
Quality, perceived and real, is and always will be a differentiator, Libby says. As advanced technology spreads throughout vehicles, the number of quality issues potentially will increase.
Some car buyers particularly are interested in fuel economy, he says. More people will join that crowd as auto makers strive to build vehicles with greater fuel efficiency in an effort to meet stricter government mandates.
As auto makers do that, they also will be “marketing and pushing fuel economy,” Libby says. “They will be raising this factor in the consumer’s mind.”
Car buyers’ treatment at dealerships is expected to improve as the auto industry responds to new buying patterns. “Our culture is moving towards customers expecting things without long waits,” he says. “No one likes a line. We’ll see a catering to the customer’s increasing need for timely, efficient interactions.”
He suggests one way to speed things up is to move more of the purchase process online.
Another important factor, Libby says, is the auto makers’ flexible-manufacturing efforts that not only keep costs down but also carry an added benefit of providing products consumers want rather than settle for what’s available on the dealership lot.
