0% Financing Attracts Car Buyers In 2001, But At What Cost for Industry in 2002
GREENWICH, Conn.--Jan. 8, 2002--According to new survey results announced today by NFO WorldGroup, one of the world's leading providers of research-based marketing information and counsel, Americans planning to buy automobiles in 2002 need incentive offers to clinch sales or the industry will suffer a difficult first half of the year.
The survey, conducted by NFO Automotive, examined financing options, car (new, used, brands) and timing preferences for 1200 recent and intended buyers from pre-September to December 2001. One third of recent and potential car buyers acknowledged that the possibility of 0% financing helped overcome fears and worries post-September 2001. While this has been an expensive proposition for the industry, the current challenge for manufacturers, is to create further offers that not only continue to attract buyers back to the market, but also allow them to earn a fair profit.
The study concludes that while the manufacturers' offers are being extended until the early part of January 2002, 41% of consumers expecting to buy in the first part of the year are now questioning that purchase decision. While deals such as 0% financing inspired consumers and helped lift confidence many buyers are still on the fence.
"Consumers are clearly motivated by these deals, so failure to extend the potential interest generated by 0% APR offers, and convert it into substantive and profitable sales, could mean that the industry may fall short of initial expectations for 2002 unless action is taken," commented Andy Turton, President, North America, NFO Automotive. "Creating carefully targeted offers that will stimulate demand from certain sectors of the market, as opposed to offering a one size fits all solution, might be the best road to take to achieve a win-win for both consumers and manufacturers alike."
The study also revealed that consumers who traditionally lease vehicles found the offer less appealing than deals such as zero interest loans. As car prices decreased, lease prices soared and consumers began to question the value of leasing, a lucrative revenue stream for the industry. 94% of consumers bought rather than leased new cars post-September.
Furthermore, 13% of buyers came into the market with the intention of buying a used car, but bought new once they saw the excellent value that some brands offered. Also, many consumers traded up. For 2002, this means that auto manufacturers need to take this trend into account and work it into new offers so that the potential for a glut of used vehicles hitting the market is managed.
Top manufacturer choices for new car purchases were General Motors' (GM) Chevrolet, Buick and Pontiac brands as well as Ford, Chrysler's Dodge, Toyota, and Honda. 50% of those drawn into the market with the intention of buying GM did so because of the deals available. Other manufacturers did not fare as well. For example, Ford kept only 40% of customers who came into the market intending to buy Ford with the offers available. Ford lost out disproportionately to Asian car makers.
Financing offers also helped consumers interested in luxury vehicles a chance to "buy up" for less.
In addition, 2002 models have yet to attract buyers. Twice as many consumers bought 2001 models in comparison to 2002 models. This possibly helped to move end of year inventory and could impact 2002 sales.
About NFO WorldGroup
NFO WorldGroup is one of the world's leading providers of research-based marketing information and counsel. "Marketing minds specializing in research(TM), NFO has facilitated Fortune 500 clients' business decisions for more than 50 years by providing in-depth knowledge and understanding of consumers and brands through research. Their services include comprehensive counsel on market evaluation, product development, brand management, customer satisfaction, pricing, distribution and advertising effectiveness. NFO is a worldwide leader in Internet-based research and maintains one of the world's largest Interactive panel communities. They are one of The Interpublic Group of Companies , and have majority-owned operations in 40 countries. Visit NFO WorldGroup on the web (www.nfow.com).