2009 CIAS: Are used cars the new new cars?
If you were looking for Canadian-specific industry news like announcements about new plant openings or new products to be built here, this year's CIAS media day was not the place to be.
Oh sure, there was some news about Chrysler’s ongoing sustainability plan.
The Detroit automaker will start nickel-and-diming their dealer network by cutting dealer profits on vehicles and forcing them to fill up the gas tanks of Chryslers when they arrive from the factory. Oh, and dealers will be charged $1 (yes one loonie) everytime they access the company’s internal inventory system (like when they’re looking for a vehicle for a customer from another dealer.)
Other than that, the reality of a long new car sales downturn as highlighted by January’s big drop is starting to permeate with most Canadian retailers.
In the U.S., predictions of what the 2009 annual new vehicle sales run rate range from as low as 8.5 to 11.5 million units. Take the usual U.S. to Canada sales ratio of 10 to 1, and most in the biz know that 2008’s 1,635,986 units sold last year in this country are now officially nostalgia.
Behind the optimistic media presentations, here at what is usually the kickoff to the spring sales season here at CIAS, off the record, several Canadian auto exes are concerned new car sales could get much worse before they get better.
The first threat is that cars have become too reliable, durable and feature filled. The scenario goes something like this.
You own a four-year old Blah-de-blah 5000. Your lifestyle hasn’t changed (that’s fancy marketer talk for you haven’t added any offspring to the house, and for the foreseeable future you’re going to hang on to your job.)
Your 5000 isn’t rusty, it’s been reliable, fuel efficient enough for your budget—and maybe most importantly—you’ve managed to pay it off.
So, if you’re like most Canadians girding for the recession, why would you buy a new car?
The second threat new car retailers are facing is the lesser of two evils—the glut of low-mileage used cars.
According to analysts at DesRosiers & Associates, off fleet and off lease vehicles will reach record levels this year in Canada and “provide a serious downside threat to the new vehicle market.”
In other words, those buyers who absolutely, positively have to get a new car will have more choice than ever before to NOT buy new.
One auto executive told me they’ll be implementing a certified pre-owned program as soon as possible. And for the first time, BMW Canada is running national TV advertising for its CPO program.
How real do you think either of these threats are to new car sales are?
If you’re in the market to get a car new, will you buy new, slightly used, or stay put with old reliable?
[Source: DesRosiers & Associates]
Last year I bought a used car for the first time....low Km and almost 50% less than the same model 0KM. No doubt I will buy used again if cars that good are available.
Posted by: Flavio Maciel | February 12, 2009 at 09:58 AM
Nope, I'm not planning to buy a darn thing, because I don't have to. I bought my first ever brand new car in 2003 (after more than 20 years of car ownership), and it has been a great vehicle. It still is, and, now, it's paid for!
If something changes, I would have to think long and hard about buying new. The stated prices of cars I might be interested in are pretty good, but, then you start seeing all the extra charges start to add up. Freight and PDI charges have shot up in recent years, and a number of dealerships have a mandatory charge for replacing the air in your new tires with nitrogen (completely unnecessary for every day driving), lien registration, "administration" fees, etc.
You get the picture. For me, cars are fun, but, ultimately, they are a tool to help me get from point A to point B, efficiently and in some comfort. Adding needless doo-dads and marginal/unwanted charges is not the way to win me over.
Posted by: Chris | February 12, 2009 at 12:45 PM
We bought a new car back in 2003 as well, and it too is paid for. We decided to buy a second new vehicle this past November for a couple of reasons, first the price was a bargain and second our eldest child will be 16 in a year. Turns out having the second car was a blessing especially during the Bus strike in Ottawa.
I've never heard of tires requiring nitrogen, that's a new one to me. I wonder too, is all the bells and whistles on the new cars really worth it? It seems the automakers are falling all over themselves to offer the most features, but wouldn't it make more sense to offer fewer features at a lower price during a downturn?
Our new car has heated seats, tire pressure monitoring system, (on our old car its called a pressure gauge and its mounted in the glove box!), a 6 disk CD player, dual zone climate control, etc.
All this stuff is "nice to have" but is it really necessary? Don't think so. Our old car doesn't have any of that. It has a single CD player, and I don't find it a burden to change the CD every 45-60 minutes. Most trips don't last that long anyways.
We didn't buy the new car because of the features, we bought it because of the way it drives and the safety features. Safety is something I'm absolutely willing to pay for. Electronic stability control for example should be standard equipment. It makes a HUGE difference especially in the winter months.
Posted by: Randy | February 13, 2009 at 07:43 AM