Chicago, June 1, 2011 -- As the auto industry continues to set strides of recovery just as our economy has, taking advantage of new opportunities is necessary for continuing to assist car buyers in getting the vehicles they desire. This is the best time for dealerships to take advantage of the market unfolding before them.
Last year, more than 38 million used vehicles were sold by franchised and independent sales. That is nearly a 3-1 ratio of new to used. Of these vehicles, the certified pre-owned saw an all-time record high last year of 1.7 million units, a jump of more than 6 percent. Although these numbers did see an increase, a downside has been set to the balance.
In the past couple of years the life of vehicles has increased, as well as their ownership time. The trend is that while vehicles are living longer on the road, so are the terms people are financing. In order to keep payments low, the average finance term is drawn out over 60 months. This creates a longer shelf life and a lower selection of higher quality pre-owned vehicles.
Last year, the "sweet spot," or used vehicles of 3-4 years of age, dropped in availability by 19 percent. What's even more dramatic is that because of the higher demand and lower selection, the prices soared more than 25 percent - an increase on average of $4,000 per vehicle that is three years old.
Financing is tougher and payments are higher, resulting in longer possession of these vehicles - especially if buyers can't get what they want at an appropriate price.
Unless, you create a new way; a better way.
The "Big Three" are aggressively attacking leasing after seeing the gains that imports have received because of it, and rate subventions from the captive finance sources on new vehicle purchases allows for lower monthly payments - 83 percent of all car purchases are financed. Due to shortages of off-lease and fleet vehicles at auctions, prices are high and in effect, raise the monthly payment for the potential consumer.
Mudd Advertising has joined forces with Allied Solutions out of Carmel, Indiana, and Auto Financial Group (AFG) out of Houston to package a Residual Based Finance (RBF) tool as a go-to-market, consumer-driven and turn-key marketing campaign.
The premise of iAutopayment RBF is to introduce and explain to the consumer the advantages of a 24 or 36-month balloon finance alternative to the conventional retail installment contract. The program focuses on the two most important buying needs of today's consumer:
Low monthly payment (payments calculated with RBF can be lower than conventional payments by up to 40%) and trade cycle management (allowing the consumer to trade out of vehicle much faster).
Statistics show that the average consumer is looking to trade in their current vehicle after 26 months into a 60-month contract. This scenario creates an in-equity position for the consumer and a lost customer for the dealer. They do not return to the originating dealer for a couple of basic reasons:
1) They know they owe more for the car than it's worth.
2) They do not want to return to the same store due to embarrassment or they blame original dealer for their current predicament.