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July 27, 2020 by Allan Janssen[FONT="][/FONT][h=1]Captive financing helped June car sales: J.D. Power[/h]
[FONT="]J.D. Power & Associates says the success of Canada’s June new-car sales boils down to one factor: 84-month captive OE financing.[/FONT]
[FONT="]Analysts at the data firm said June, the traditional start of the summer selling season, was the “least bad” month under the pandemic.[/FONT]
[FONT="]That’s still about 21% under the June 2019 mark, but an improvement over March, April, and May, with some 155,439 units sold.[/FONT]
[FONT="]“Nearly all of the success we witnessed in June was down to one single sales strategy: captive financing of a new vehicle at 84 months at low APR+ some cash incentive,” analysts said in the July 9 Canadian New Vehicle Retail report.[/FONT]
[FONT="]The report, which offered a look at the June 2020 retail landscape, revealed[/FONT]
[FONT="]And same-brand trade-ins have returned to pre-virus levels, with an average of 49% of trade-ins at a dealer being of the same brand. So, there is less deal closing this month on “conquested” buyers, on average.[/FONT]
[FONT="]Luxury brands continue to be especially hard hit, front end margin is depressed from 4.5% to 3.6%, or on average $700 per unit, potentially a loss of $350,000 in vehicle front end profit for the average luxury dealer.[/FONT]
[FONT="]J.D. Power & Associates says the success of Canada’s June new-car sales boils down to one factor: 84-month captive OE financing.[/FONT]
[FONT="]Analysts at the data firm said June, the traditional start of the summer selling season, was the “least bad” month under the pandemic.[/FONT]
[FONT="]That’s still about 21% under the June 2019 mark, but an improvement over March, April, and May, with some 155,439 units sold.[/FONT]
[FONT="]“Nearly all of the success we witnessed in June was down to one single sales strategy: captive financing of a new vehicle at 84 months at low APR+ some cash incentive,” analysts said in the July 9 Canadian New Vehicle Retail report.[/FONT]
[FONT="]The report, which offered a look at the June 2020 retail landscape, revealed[/FONT]
- The proportion of all industry financing in the 84-month term gained 10 points of share vs. June of 2019 (47% vs 37%). Incidentally, 96 month was down during the same time.
- Finance type of sale increased again, from 53% to 61% of all transaction, with losses for both “cash” deals and leasing. This is up vs. last month, and last year.
- The frequency distribution of APR essentially at “0%” (by “zero” we mean “0.9%” or lower) increased dramatically from 26% last year to 42% this year.
- Even for luxury marques, the proportion of financing deals essentially at “0%” increased dramatically from 19% to 55%. Note that more than 1-in-5 luxury vehicles are now financed.
[FONT="]And same-brand trade-ins have returned to pre-virus levels, with an average of 49% of trade-ins at a dealer being of the same brand. So, there is less deal closing this month on “conquested” buyers, on average.[/FONT]
[FONT="]Luxury brands continue to be especially hard hit, front end margin is depressed from 4.5% to 3.6%, or on average $700 per unit, potentially a loss of $350,000 in vehicle front end profit for the average luxury dealer.[/FONT]
