Car buyers shun new models for lack of incentives

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By: Wise Marketer Staff |

Posted on September 1, 2005

As car buyers get used to manufacturer-sponsored purchase incentives, such as the current fad for employee-pricing programmes, they are increasingly rejecting newly launched models that don't offer discounts, according to the J.D. Power and Associates '2005 Escaped Shopper Study'.

The study, which analyses why consumers consider a model, but ultimately purchase a different make or model, finds that shoppers increasingly cite a lack of incentives/rebates as the reason a vehicle is rejected. This is particularly true of all-new launch models, which are often not discounted due to high demand. Twenty-one percent of shoppers rejected a launch vehicle due to a lack of incentives - up from 18% in 2004. A lack of incentives is the third-most-cited reason shoppers reject a model, following price and monthly payments.

Steve Witten, executive director of automotive research at J.D. Power and Associates, said: "The preponderance of rebates and incentives that have been available over the past several years has created an expectation among shoppers that has extended even to launch models. In many cases, the more practical shopper is willing to forego the excitement of buying a newly launched vehicle in favour of a financial incentive."

Multiple segment shopping
The study also found that, with the introduction of numerous crossover models in recent years, more consumers are shopping in multiple segments than ever before. For example, more than one-half (54%) of compact car buyers rejected a vehicle in a different segment due to price. Midsize cars are frequently cross-shopped with SUVs, often because of gas mileage concerns with SUV models.

Concern over fuel economy is among the top five reasons shoppers reject a model, often causing them to buy a vehicle in a different segment altogether. Among shoppers who rejected a full-size SUV model due to this concern, a large number (43%) ended up buying a midsize SUV instead, while only 19% ultimately bought another full-size SUV.

"While SUVs are still highly popular because of their size and styling, rising gas prices weigh heavily on the minds of new-vehicle shoppers," said Witten. "An SUV that is affordable and has good gas mileage should be very successful in winning over customers who are currently driving a car, which is why many gravitate toward the smaller SUVs on the market."

Most rejected vehicles
Pickup trucks and SUVs are more frequently rejected than vehicles in any other segment due to fuel economy. Among those who seriously considered a full-size SUV, 43% cite fuel inefficiency as the top reason for rejection. SUV sales from year to year are directly reflected by consumer concerns. From 2003 to 2004, full-size SUV sales declined by 39,455 units, according to data recorded by the Power Information Network (a division of J.D. Power and Associates). During the same period, sales of midsize SUVs increased by 57,813 units and entry SUVs increased 63,466.

The '2005 Escaped Shopper Study' was based on responses from 25,600 new vehicle owners who were surveyed in May and June 2005. J.D. Power and Associates operates and consults in sectors including market research, forecasting, consulting, training and customer satisfaction.

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