KBB.com: Holiday Shoppers Keep Eye On Autos

by Karl Greenberg, Dec 22, 2010, 3:04 PM

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Shoppers are planning to spend less during the holidays this year, partly to save up for big-ticket items like automobiles. But Kelley Blue Book (KBB.com), which specializes in auto research and pricing, predicts they have gotten a lot more careful about how they shop for vehicles.

As for the usual round of holiday gift shopping, KBB.com says nearly 40% of consumers the firm polled said they are planning to spend less this holiday season (spending $1,265 average) when compared to last year (when they spent on average $1,372).

There was also a big increase in numbers of those who said they would spend less than $750 this holiday season (up 12 percentage points, from 40% to 52%). And 14% of those surveyed said they plan to spend $751-$1,000 this season, which is down from 24% from last year. Kelley Blue Book says that nearly 20% of shoppers who are cutting back on their holiday spend this year say they are doing so because of an upcoming large vehicle or home-related purchase for which they are gearing up.

James Bell, executive market analyst for kbb.com, tells Marketing Daily that the bottom line as far as auto buying is concerned is that people are a lot more conservative about how they shop for vehicles.

"People have done a lot of work to get their financial houses in order over the last couple of years and now are gradually going back into the market because they have held off purchasing," he says. "Many consumers are now very cognizant about what got them in trouble in the first place: overextending credit, leases, exceeding mileage limits. Now they are going to market with thicker gloves on."

Indeed, per KBB.com, about half of shoppers are delaying their next vehicle purchase, with 39% of them doing so because of financial concerns. Almost half are delaying for seven or more months, and a quarter for four to six months.

Still, KBB sees that consumers are more optimistic about what 2011 holds than how they felt about 2010 at this time last year. Although only 48% of those surveyed said their current economic situation is good, 51% said they expect their economic outlook will be so in the next 12 months.

Bell says 2011 will see something like a return to big leasing deals that were prevalent eight years ago, particularly in the luxury segment, as automakers ramp up efforts to get customers into their vehicles. "Now automakers have money to incentivize leasing. For BMW, Mercedes-Benz and Lexus, the majority of their business in higher-level and entry vehicles is leasing and with the market share battle between those three this year and next, leasing will be a good way for them to drive share."

And, explains Bell, leasing ultimately helps boost the all-important resale value of a brand's cars, since it gives the manufacturer a stream of cars to feed into its certified pre-owned vehicle program, which in turn keeps used cars out of auctions, thus improving overall resale value.

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