Are Toyota Issues to Blame for Overall Used Market Decline?
BANDON, Ore. — When explaining the softness in the used-vehicle market thus far in February, CNW Research pointed to the issues surrounding Toyota, suggesting that used sales and transaction prices seemed to "slip on Toyota's banana peel."
Specifically, used-vehicle sales for February are expected to drop 1.8 percent from last year and used prices have dipped 1.3 compared to January.
"February used-car sales are looking like they'll be off about 2 percent versus year ago, but the blame can be put at Toyota's feet," suggested CNW president Art Spinella, who noted that used sales for the automakers plummeted 39 percent in the days immediately following the recall.
He noted that this sales trough included affected and non-affected Toyota models.
"It appears both independent dealers and used-car customers were waiting for events to unfold. Many independent dealers and private parties didn't have access to the necessary repair parts and feared both liability and buyer backlash," Spinella explained. "Within a week of the recall/stop sale, used Toyota sales improved and transactions were down barely 11 percent."
However, through Monday, Toyota's used-vehicle sales were off 12 percent year-over-year, as they "remained in a funk."
Meanwhile, as far as the month-over-month price decline, it "can be traced almost exclusively to Toyota products," Spinella argued, pointing out that essentially every mass-market brand besides Toyota either showed gains or remained static.
Looking at year-over-year data, it appears to be much brighter. Franchise dealers have seen a 5.9-percent increase in retail asking prices, while independents' asking prices have risen 7.3 percent.
Franchise dealers' actual transaction prices have climbed 3.6 percent, and independents have seen a 2.2-percent slide.
"The latter reflects the typical February pattern when inventories are slight and moving cars is tougher," Spinella explained. "This year's weather in much of the country also forced many independents to discount inventory a bit more than usual to make up for lower on-lot traffic."
Moving on, CNW also examined some trends among Toyota intenders. The data indicated that 18 percent of used-car intenders who listed a Toyota vehicle as their top choice eventually chose a different brand.
"Honda was the primary used beneficiary with about a quarter coming from Toyota intenders," Spinella pointed out.
Meanwhile, 18 percent of these former Toyota intenders chose to buy a Ford vehicle and 6 percent went to Hyundai.
During "non-recall times," CNW noted that in the last five years, just 6 percent of Toyota used intenders have chosen a different brand.
Spinella went on to note: "For independents, which are on track to a 7-percent increase over a year ago, the Toyota recall was an annoyance because of the inability to get repair parts or having to ‘wait in line' at Toyota dealerships for the fix.
"Since most independents, however, were dealing with older Toyota models, and with customers who are price buyers, the impact wasn't as severe as it could have been," Spinella continued. "Moving customers to alternative brands is relatively simple for most independents since their customers aren't as brand loyal as new-car shoppers."
Continuing on, Spinella offered some general context to the overall February data.
He suggested that "Not much of a pattern should be read into the February data. There have been too many outside influences that broke the trend line."
Used-vehicle intenders have put off purchases roughly 3.6 months, compared with 3.3 months a year ago. In January, the purchase delay time was 3.2 months, down 13 percent compared to January 2009.
"All of that translates into about 96,500 postponed sales (pent-up demand) this month versus 80,400 in January," Spinella shared. "The industry will likely make up the difference by spring and return a near-40 million sales rate."
New-Car Quality Perception
Moving on, as part of its ongoing Purchase Path research, CNW also shared its latest data regarding quality perception among new-vehicle shoppers and found that Honda ranked No. 1 and Buick overtook Toyota to place second.
"Among new-car intenders considering 2010 model year mass-market vehicles, regardless of the brand on their existing shopping list, Buick's new image-making and Honda's long-standing reputation placed them first and second in the perception of quality," Spinella stated.
"For Buick, bragging rights are clearly in order," he added. "The GM brand has succeeded in displacing Toyota in the No. 2 spot with a combination of its own improvement and Toyota's notable decline."
Interestingly enough, this drop-off for Toyota started long before its recent recall, as CNW noted that the automaker's quality perception has been on a downward slope since model-year 2005.
That year, it was rated 9.28 (out of 10) for quality perception. For the 2008 models, it was 8.94, marking the first the score had dipped below 9.0, according to CNW.
It was relatively static for 2009 models (8.97). And then this year, the score fell to 8.51.
"The most recent decline can be traced to word-of-mouth and Internet chatter since all of the decline was registered prior to Toyota's Jan. 21 recall and subsequent fall out," Spinella stated.
Continuing on, CNW spotlighted Mercury and Volkswagen for their improvements in quality perception.
Both brands have posted solid gains, with Mercury starting to show some gains in 2005 and climbing to a QP score of 8 this year.
"In Mercury's case, the marque appeared doomed just a few years ago, but to Ford's credit it recognized there was a chance, slim as it might be, to perform some magic," Spinella explained.
"With an un-carlike patience, it improved the quality, marketing and dealer support and delivered steady quality perception improvements beginning in 2005 and culminating with the 2010 model year with a near 8 QP score," he noted. "Obviously some of this is tangential to Ford brand's improvement, but nonetheless worth noting."
VW, meanwhile, has made comparable strides and has gained some ground particularly through the Web.
"Volkswagen has similarly seen incremental and steady improvements in its quality perceptions after a significant decline post 2002 due to poor quality," Spinella shared. "New models, better built, are finally coming into their own, especially on blogs and in Internet automotive chat room."
Offering some additional context, he noted: "For builders of mass-market cars and trucks the key is understanding that word-of-mouth (both personal and on the Internet) generates perceptions quickly and those views are believed strongly by both the writers and the readers and trump a good deal of advertising."