Car Purchasing Process - US - April 2016

OVERVIEW

What you need to know

Definition

EXECUTIVE SUMMARY

The issues

Figure 1: Total US sales and fan chart forecast of market, at current prices, 2010-20

Figure 2: Average age of passenger cars and light trucks, 2002-15

Figure 3: All grades all formulations retail gasoline prices, dollars per gallon, 2000-16

The opportunities

Figure 4: Future purchasing plans, all, December 2015

Figure 5: Purchase reasons, all, December 2014 versus 2015

Figure 6: Dodge Ram online ad, 2015

Figure 7: Type of vehicle for next purchase, by age, December 2014 versus December 2015

What it means

THE MARKET

What you need to know

Car sales remain strong and reaching prerecession levels

Used cars command higher share of market

Vehicle age remains at record high, with possible signs of reversing

Ongoing economic strength bodes well for car sales

Falling gas prices shifts landscape

Technology playing key role in the car buying process

Vehicle financing rates incredibly low, for now

Market size and forecast

Car sales remain strong and reaching prerecession levels

Figure 8: Total US unit sales of new and used light vehicles, 2010-15

New cars drive growth while used car sales are flat

Figure 9: Total US unit sales of new and used light vehicles, by segment, 2010 and 2015

Used cars command higher share of market despite new car expansion

Figure 10: Total US unit sales of new and used light vehicles, by segment, 2010 (inner ring) versus 2015 (outer ring)

Market will conservatively grow in the upcoming years

Figure 11: Total US sales and fan chart forecast of market, at current prices, 2010-20

Market factors

Vehicle age remains at record high with possible signs of reversing

Figure 12: Average age of passenger cars and light trucks, 2002-14

Figure 13: Personal income, 2002-15

Ongoing economic strength bodes well for car sales

Falling gas prices alter car buying demands

Figure 14: All grades all formulations retail gasoline prices, dollars per gallon, 2000-16

Technology playing key role in research and soon will in purchasing process

Vehicle financing rates incredibly low, for now

Figure 15: Effective federal funds rate, 1990-2015

KEY PLAYERS

What you need to know

Technology shaping demand and buying process

Hybrids face challenge as gas prices plummet

Online services will streamline process

What’s working?

Technology shaping demand and buying process

Figure 16: Purchase reasons, all, December 2014 versus 2015

Technology raises consumer confidence during buying process

Figure 17: TrueCar online ad, 2015

What’s struggling?

Hybrids face challenge as gas prices plummet

Figure 18: US unit sales and forecast of hybrid and plug-in vehicles, 2010-20

Figure 19: Tesla email ad, 2015

What’s next?

Online services could streamline car buying process

THE CONSUMER

What you need to know

Over one third plan to purchase very soon

Many seek a vehicle with new and better technology

Consumers waiting until vehicles break down

In-person element remains crucial in car purchasing process

Women now more involved in car buying process

Large vehicles making a strong comeback

Future purchasing plans

Over one third plan to purchase very soon

Figure 20: Future purchasing plans, all, December 2015

Men more likely to be planning near-term purchase

Younger, more affluent consumers are near-term buyers

Figure 21: Future purchasing plans, by gender, December 2015

Figure 22: Future purchasing plans, by age and household income, December 2015

Parents are in the market for a car

Figure 23: Future purchasing plans, by presence of children, December 2015

Hispanics most likely to purchase in next year

Figure 24: Future purchasing plans, by race/Hispanic origin, December 2015

Purchase reasons

Many seek a vehicle with new and better technology

Figure 25: Purchase reasons, all, December 2014 versus 2015

Near-term buyers want additional car, new financing

Figure 26: Purchase reasons, plan on buying a car in next three years, December 2015

Technology critical for younger male consumers

Figure 27: Purchase reasons, by gender and age, December 2015

Desire for technology increases with income

Figure 28: Purchase reasons, by household income, December 2015

Hispanics buying because they need additional vehicle and financing

Figure 29: Purchase reasons, by race/Hispanic origin, December 2015

Reasons for not purchasing

Consumers waiting until vehicles break down

Figure 30: Reasons for not purchasing, all, December 2014 versus December 2015

Those aged 45-54 driving older cars, waiting to buy

Figure 31: Reasons for not purchasing, by age, December 2015

Opportunity for leasing to Black consumers

Figure 32: Reasons for not purchasing, by race/Hispanic origin, December 2015

Car purchase research

In-person element remains crucial in car purchasing process

Figure 33: Car purchase research, all, December 2015

Figure 34: Car purchase research, all, December 2015

Opportunity to make test-driving more friendly for joint buyers

Opportunity to make young women feel more comfortable in-person

Figure 35: Car purchase research, by gender and age, December 2015

Figure 36: Car purchase research, by household income, December 2015

Professional car reviews attractive to affluent buyers

Opportunity for more test-driving among multiculturals

Figure 37: Car purchase research, by race/Hispanic origin, December 2015

Purchase responsibility

Many consumers buy independently

Figure 38: Purchase responsibility, all, December 2015

Women now more involved in car buying process

Figure 39: Purchase responsibility, by gender, December 2015

Car buying can represent independence for Millennials

Figure 40: Purchase responsibility, by generation, December 2015

Parents, surprisingly, buy independently

Figure 41: Purchase responsibility, by generation, December 2015

Blacks more likely to be buying independently

Figure 42: Purchase responsibility, by race/Hispanic origin, December 2015

Type of vehicle for next purchase

SUV/Crossover most popular vehicle

Figure 43: Dodge online ad, 2016

Figure 44: Toyota print ad, 2016

Figure 45: Chevrolet online ad, 2016

Large vehicles making a strong comeback

Figure 46: Type of vehicle for next purchase, all, December 2015

Figure 47: Type of vehicle for next purchase, by age, December 2014 versus December 2015

Income plays a significant role in choice of vehicle type

Figure 48: Type of vehicle for next purchase, by household income, December 2015

Majority of Blacks purchase midsize/large cars

Figure 49: Type of vehicle for next purchase, by race Hispanic/origin, December 2015

APPENDIX

Data sources and abbreviations

Data sources

Abbreviations and terms

RESEARCH METHODOLOGY

US Research Methodology

Consumer research

Social Media Research

Trade research

Statistical Forecasting

Car Purchasing Process - US - April 2016

Over 55 million new and used vehicles were sold in 2015 and many consumers are still eager to buy in the coming year. Yet the landscape is shifting, and the consumer attitudes that led to strong sales over the past five years are unlikely to be repeated. Two main market drivers, pent-up demand/vehicle replacement and desire for fuel efficiency, are less important to consumers in the current market. New vehicles with features based on innovative technology are most likely to attract the next generation of buyers.

This report examines the following issues:

Car sales continue strength and reach prerecession levels
Replacement of old vehicle drives demand but trend is waning
Falling gas prices alter car buying demands