1996 National Study Supplement
Management White Paper

New vs. Used Vehicles

April, 1996

Contents

• Introduction
• Methodology
• Current Vehicles
• Next Vehicle Purchase: New or Used?
• Ratings of Used Car Sales People
• Preferred Makes
• Why Would Buyers Consider Purchasing Used vs. New Vehicles?
• The $15,000 Question: "To Purchase New or Higher-end Late Model Used?"

Introduction  Top

This 1996 Management White Paper is being provided by The Dohring Company as a supplement to our 1996 National Automotive Consumer Study.

The national study, provided as a service to the automotive industry, focused on the most topical issues of the day including:

• Consumer attitudes and perceptions of franchised car dealerships
• One-price selling versus negotiating the purchase
• Purchasing new vehicles versus late model used vehicles
• Used car superstores

This white paper is intended to provide in-depth answers to help you better understand the consumer perspective on specific issues.

The national study has not been funded by any outside source and is strictly provided as a service. The design intention was to address several primary areas of importance to our automotive, OEM supplier and dealer client base.

The Dohring Company is North America's largest provider of custom market research to the retail automotive community. We have conducted more that 3,000 automotive market research studies for dealers, dealer associations, advertising agencies, manufacturers and suppliers in North America and internationally. The company, based in Glendale, California, employs over 100 full time staff and has conducted over 300,000 interviews with vehicle buyers in 1995 alone, and over one million in the past ten years.

Additionally, we are proud to have been designated Marketing Research Supplier to the 1996 Atlanta Olympic Games.

The Dohring Company is a full-service provider of marketing research and the developer of TrendTrak®, our exclusive on-site survey polling device. For additional information, please contact us at 1-800-242-8022.

Methodology  Top

A total of 1,253 respondents were surveyed from across the 50 United States in proportion to their household populations. All respondents were surveyed by telephone during December 1995, and were qualified as intending to purchase a new or used vehicle in the future from a new car dealership. The study has a standard error of ± 2.8%.

About six in ten respondents (59.2%) currently drive vehicles which they purchased new and about four in ten drive vehicles they purchased used (40.8%).

Next Vehicle Purchase: New or Used?  Top

Upon initial questioning, about seven in ten respondents (70.4%) intend to purchase their next vehicle new, while about three in ten (29.6%) intend to purchase their next vehicle used.

Buyers' intentions to purchase next vehicle as New or Used?

In this study, a greater percentage of respondents intend to purchase their next vehicle new (70.2%) than did in the August 1993 Dohring Company national study (63.7%) or the January 1995 Dohring Company national study (63.8%).

Intend to purchase next vehicle New:

A greater percentage of respondents who intend to purchase a European nameplate as their next vehicle intend to purchase these vehicles new (82.5%) than those who intend to purchase Domestic nameplates (70.0% as new) or Japanese nameplates (77.1% as new).

A greater percentage of females than males intend to purchase their next vehicle new, and this is most evident among the youngest age category (77.9% of 18-24 year old females and only 50.7% of 18-24 year old males intend to purchase their next vehicle new) and the highest age category (70.8% of females 65 years and over intend to purchase their next vehicle new and 59.2% of males 65 years and over intend to purchase their next vehicle new.)

Intend to purchase next vehicle New:

Of those who currently own vehicles they purchased used, 52.2% intend to purchase another used vehicle next time and 47.8% intend to purchase a new vehicle next. About seven in ten used vehicle owners (69.0%) would consider purchasing a new vehicle at some time in the future.

Ratings of Used Car Salespeople  Top

The used car salespeople received by far the lowest ratings among dealership staff. Not only were they rated as creating the least favorable impressions, but they were also rated as having made no improvement in impressions over the past 5 years, while other dealership staff were rated as having made substantial improvements over the past 5 years. Such unfavorable impressions of the traditional automotive retailers provide a substantial market opportunity within the vast used car market for new organizations such as used car superstores which may be able to create a seperate and more favorable impression with automotive consumers. For more information regarding used car superstores, see the Management White Paper entitled: "Used Car Superstores."

Respondents were asked to rate their impressions of new car dealerships and certain dealership personnel. The rating very favorable was assigned the value 2.0, favorable was assigned the value of 1.0, neither favorable nor unfavorable was assigned the value of 0.0, mostly unfavorable was assigned the value of -1.0, very unfavorable was assigned the value of -2.0 and mean scores for each were calculated and are presented below.

Impressions of auto dealerships:

When asked to compare their overall impressions of dealerships and their personnel today to their impressions five years ago, the rating more favorable was assigned the value of 1.0, the same was assigned the value of 0.0, less favorable was assigned the value of -1.0 and the mean scores were calculated and are presented below.

Overall impressions compared to 5 years ago:

Preferred Makes  Top

The top ranked makes for next new and used vehicle purchases are:

Why Would Buyers Consider Purchasing Used vs. New Vehicles?  Top

Those who would consider purchasing a used vehicle were asked why they would purchase a used vehicle instead of a new vehicle. The top reasons were: "the high prices of new vehicles" (39.5%), "used vehicles are more affordable" (37.9%: the other side of the same "coin") and "used vehicles provide a better value (10.1%).

Reasons for purchasing a Used vehicle instead of a New one:

Among all respondents, seven in ten (71.8%) said that the prices of new vehicles cause them to consider purchasing a used vehicle. In last year's study, 62% of car buyers said that the prices of new vehicles cause them to consider purchasing a used vehicle. Thus, there is a 10% increase in car buyers, nationally, within just one year, who are considering purchasing a used vehicle due to the high cost of new vehicles. The issue of new vehicle affordability has worsened substantially over the past 12 months.

Do the prices of New vehicles cause buyers to consider purchasing a Used vehicle:

Even among those who intend to purchase their next vehicle new, 62% said that the prices of new vehicles cause them to consider purchasing a used vehicle.

The affordability crisis affects more than just the lower income car buyers. A substantial percentage (45% or more) of car buyers with annual household incomes of $75,000 per year and over indicated that the prices of new vehicles were causing them to consider purchasing used vehicles, as well.

The prices of New vehicles cause buyers to consider purchasing a Used vehicle:

The $15,000 Question: "To Purchase New or Higher-end Late Model Used?"
 Top

We probed respondents' purchase decisions between new and used vehicles further by offering each respondent the following alternatives:

"Which of the following would you prefer to purchase:

About half the respondents chose the new vehicle and about half chose the used vehicle.

Would consumers prefer to purchase a $15,000 New vehicle or a higher-end Used vehicle, now priced at $15,000?

Remembering that seven in ten auto buyers in this study are currently intending to purchase a new vehicle next, and so would likely walk into the dealership intending to purchase a new vehicle, if confronted with the alternative of purchasing a new vehicle or a higher-end late model vehicle, under this scenario, two of the seven (roughly 20% of all auto buyers who would purchase from a dealership) would switch to the late-model used vehicle. This represents a potentially dramatic shift in car buyers' purchasing habits, away from new vehicles and toward late model used vehicles.

Even among those who intend to purchase their next vehicle new, 39.1% chose the used vehicle in the $15,000 scenario.

Would consumers prefer to purchase a $15,000 New vehicle or a higher-end Used vehicle, now priced at $15,000?

Among those who indicated that they intend to purchase new vehicles only and who, earlier in the survey, said they would not consider purchasing a used vehicle at all, when offered this $15,000 alternative, more than one in five (22.4%) of these new vehicle-only buyers chose the higher-end late model used vehicle over the new vehicle.

The new vehicle affordability crisis is very real, and, along with the increasing availability of good quality late model used vehicles, is having an unprecedented effect on the automotive retailing industry. For information regarding used car superstores, see the Management White Paper entitled: "Used Car Superstores."