December is fast approaching, and it's that time of the year where dealers dust off their holiday decorations and special promotions. It's also one last gasp for dealers and automakers to meet their annual sales goals. Fortunately for dealers, there's one gift that they can expect under their tree every December. Edmunds.com found that over the last five years, December has delivered some of the highest average transaction prices of the year, while at the same time delivering some of the lowest discount percentages. That translates to the biggest profits of the year on every new car sold. Happy holidays, indeed!
But like the snowflakes that fall from winter skies, no two Decembers are exactly alike. Every year offers a unique economic environment that can either restrict or motivate a shopper's buying behavior. Dealers can separate themselves from the competition by identifying these environments and adapting their sales and marketing efforts accordingly.
Here are five industry and economic trends that are blazing the shopping trail for car buyers in the 2012 holiday season:
1) Disaster Relief
Edmunds.com estimates that as many as 250,000 vehicles were damaged by Hurricane Sandy. Once those insurance checks clear, many people in the affected region will be back in the market for a new car. And while some dealers in the region have their own recovery to worry about, they should not miss out on an opportunity to reach out to these buyers. Many automakers have already offered special incentives to storm victims, and dealers can always add even more value to the deal. Extra flexibility with customers in these special circumstances can go a long way for dealer reviews and word of mouth in the local community.
2) Luxury Wars
It's no secret that this time of year is a boon for the luxury car market. November and December have been the top two months for luxury sales each year going back at least the last decade. But this year's final two months are poised to be even bigger than usual for luxury automakers.
"The scuttlebutt at the recent Paris auto show," writes Edmunds.com Sr. Analyst Michelle Krebs, "was that European auto executives, especially those running luxury brands, were alerting their U.S. dealers to expect an influx of inventory to sell by the end of the year because of softer sales in Europe and China while the U.S. market increases."
As a result, says Krebs, luxury brands — including Japanese and domestic brands looking to stay competitive — could push for even more aggressive promotions and discounts.
3) Post-Election Reprieve
Whether or not your favorite candidates won, you're almost surely relieved to see that the political jockeying has come and gone (at least for now). And for car buyers, the elections bring a clearer future that in turn breeds confidence. The looming fiscal cliff still brings uncertainty to car buyers, but when the issue becomes clearer one way or another in December, buyers will be better able plan their finances and know exactly how much they can spend on their next new car. The good news for dealers: there were already signs that consumer confidence was starting to bounce back even before the election, due to a rising real estate market.
"Simply put, consumers are feeling wealthier — and that's in spite of a lack of substantial income growth," says Edmunds.com Chief Economist Dr. Lacey Plache. "As we saw pre-recession and during the recovery to date, consumers are more inclined to make large purchases, such as new vehicles, when they feel wealthier."
The end of the election season also has another benefit that should not be overlooked: without the noise of political and issue ads, there are suddenly a lot more opportunities on TV airwaves for dealers to spread their marketing messages.
4) Keep on Trucking
As everyone learned the hard way during the recession, the housing market and the automotive market go hand in hand. So, car dealers should be excited to know that the housing market is slowly picking back up. And when housing improves, that typically means a bigger demand for pickup trucks to pull the load in new construction projects.
Of course, not all regions have seen a recovery in the housing market. So how can savvy dealers identify the signs of recovery in their areas? Try to take note of increasing housing prices in the neighborhood. Or, more simply, keep your eyes open during your daily commute. If you notice new construction projects under way, then now might be a good time to put a little extra marketing muscle behind those pickup trucks.
5) Lease Returns
In late-2009, the industry saw a noticeable spike in lease penetration. Fast forward to today, and standard 36-month leaseholders are returning back to the market. In fact Dr. Plache expects that lease terminations could increase the pool of likely new car buyers by 1.5 to 2.0 percent in this quarter alone. And with lease penetration still riding high (this year has enjoyed some of the highest levels on record), there is as strong a chance as ever that these customers will want to sign yet another lease in a brand new vehicle.
But November and December are just the beginning of the tide of lease returns. Dr. Plache estimates that there will be 500,000 more lessees returning to the market in 2013 than in 2012.
Edmunds.com is proud to work with members of its Premier Dealer Program to enhance the car buying experience for both dealers and consumers. Learn more by contacting an Edmunds.com dealer representative at 1-855-EDMUNDS or firstname.lastname@example.org.