Incentives could be key to new vehicle buyers

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By: Wise Marketer Staff |

Posted on September 3, 2002

The aggressive manufacturer-sponsored rebates and low-interest finance rates that are spurring strong vehicle sales are proving effective in influencing the decisions of new vehicle buyers, according to the '2002 Escaped Shopper and Owner Loyalty Study' from JD Power and Associates.

The study, which examines the reasons why new vehicle shoppers consider but reject certain models, found that both price and incentives play an important role in consumers' decisions. Among new-vehicle buyers who rejected at least one other model, and who obtained 0% financing, nearly 50% rejected another model because it failed to offer sufficiently low rates.

"Shoppers weigh the incentives of one model over another," said Chris Denove, a partner at JD Power. "When 0% financing first hit the scene, it drew people into the market who otherwise would have delayed their purchase. But now that the newness of it has worn off, we're seeing that 2.9% interest rates will do just as good a job of convincing someone to buy."

Price sensitivity
Price continues to be the primary reason that consumers decide not to buy a model they originally considered. Moreover, when someone considers two or more cars, they usually end up buying the less expensive model, according to the study.

"People frequently go out and look at one or two aspirational models that stretch their budget, but when it comes time to make a payment, practicality wins in the end," said Denove.

Sales technique
One of the more surprising findings is that salespeople sometimes cause shoppers not to purchase the vehicles they represent by putting them off the entire brand. Overall, 16% of vehicles are rejected due at least in part to the shopper's perception that the dealership's staff was unprofessional or, worse still, treated them badly.

"Some people get an uneasy feeling about the way their salesperson handles their business, so they decide to buy an entirely different make rather than driving across town to find another dealership that sells the same make," explained Denove.

Product perceptions
The study also revealed that some perceptions about vehicles do not always match reality, citing Jaguar as an example. Jaguar is one of the most frequently rejected brands due to concerns over reliability. However, JD Power's 2001 Vehicle Dependability Study shows that Jaguar actually makes some of the most dependable vehicles on the road. Likewise, BMW and Mercedes-Benz models are frequently rejected because people believe they are too expensive to maintain, and yet the two brands provide free scheduled maintenance for the first few years of ownership.

"It takes a long time for people to acknowledge product improvements, yet just a single moment of bad press can sour the public's opinion of a vehicle," said Denove.

Top ten rejection reasons
The 2002 Escaped Shopper and Owner Loyalty Study, which was based on responses from over 30,300 new vehicle owners who registered their vehicles in January and February 2002, revealed the top ten reasons for rejecting particular models:

  1. The total price was too high
  2. The total monthly payment was too high
  3. Didn't like the exterior style or design
  4. Limited availability from local dealership
  5. Salesperson was unprofessional
  6. Wasn't available with rebates or incentives
  7. Didn't like interior design or appearance
  8. Concerned about reliability
  9. Wasn't available with low interest finance
  10. Vehicle was too small

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