• by Jack Loechner , Staff Writer @mp_research, March 18, 2011

According to a recent Mintel study, supported with NADA data, total U.S. sales of new cars and light trucks reached 11.6 million units in 2010, an 11% increase from 2009.This is a reversal of a decade of declining unit sales that started in 2000 when 17.4 million cars were sold.

The 2010 result is still one of the lowest in recent history but it is a positive sign that the cost-cutting measures the industry has taken, such as slashing brands and cutting back production, worked to make the industry more geared towards profit rather than production volume.

The number of new car dealerships in the U.S. fell 26% between 1990 and 2010. While declines have been relatively even over the past two decades, they gained momentum starting in 2008 at the start of the recession. Between 2008 and 2010, the total number of dealerships fell 11%. Dealership decline has largely been among those that sell in smaller volumes. For example, in 1990 there were 6,330 dealerships with sales of fewer than 150 new vehicles per year. In 2010 there were 4,161 such dealerships, a 34% decline.

Total Sales At New Car Dealerships (At Current Prices, 2005-10)
	$million	% Change	Units x 000	% Change
2005	$699,000	-	16,995	-
2006	675,300	-3.4	16,560	-2.6
2007	693,300	2.7	16,154	-2.5
2008	576,051	-16.9	13,247	-18.0
2009	486,899	-15.5	10,431	-21.3
2010 (est.)	586,713	20.5	11,590	11.1
Source: Mintel/Automotive News, March 2011

The number of U.S. vehicles on the road is shrinking as well. Some 14 million vehicles were scrapped in 2009, exceeding the 10 million vehicles sold that year. This has resulted in a diminished number of vehicles in operation in the U.S. According to the Earth Policy Institute, using data from the National Automobile Dealership Association (NADA) and R.L. Polk & Co., the total number of vehicles in use in the U.S. dropped 1.6% in 2009 to 246 million. Vehicle registrations also dropped to 10 million, a 33% decline from the year before.

The decrease in vehicles on the road suggests that consumers chose to wait out 2009 to buy a new car. The median age of cars on U.S. roads is increasing. In 2008, the most recent year of which data are available, the median age for passenger cars increased to 9.4 years, or 2.2%. The median age for light trucks increased to 7.5 years, or 5.6%. Delaying spending on big-ticket items like new cars is a result of economic uncertainty, says the report.

Car buyers turn to the people who are most important in their life for advice, pointers, purpose, etc. to make a purchase decision. In Mintel's consumer survey, the majority of respondents report that this person is their spouse or partner. Aside that the intimacy of this relationship dictates this happen, there is also the practical aspect: the spouse or partner may likely also be driving the vehicle (and in some cases helping pay), so they have investment in the purchase.

The test drive is the most influential factor among respondents who purchased cars over the past three years. Those aged 25-44 are most influenced by test drives as  these respondents may have families so therefore may be most concerned about safety and roominess and rate performance and comfort lower. The highest-income households are most influenced by test drives; test drives heighten factors such as comfort, amenities and horsepower, which are likely important for these respondents to gauge.

Consumers need to touch, feel and imagine themselves in the vehicle they are considering purchasing, says the report. This experience, above all else, is what matters.The test drive dominated all other choices, as the incidence of test drives as influencing purchase was almost double that of dealer warranty, the second most mentioned influencer.

Consumers are looking for a tangible experience when they are browsing for a new car. They are concerned about financials, such as how much it costs, the details of the warranty, the terms of the financing, etc., but above all else they are open to being wowed when they are actually inside the car.

This is the emotional component to the car browsing experience that cannot be researched in advance or debated with friends. This is where the showroom experience can shine or fail, which is why above all else, dealers need to do what they can to get potential buyers inside the vehicles, even if they are not necessarily convinced it is the car for them.

Purchase Influence of Last New Car Model Purchased (Within Previous Three Years, Oct., 2010, Internet users 18+)
	% All Respondents	% Male	% Female
Test drive	63%	61	65
Dealer warranty	37	38	36
Hassle-free environment	28	31	23
Dealer trade-in amount	27	30	25
Convenience of retailer to home	22	23	20
Rebate offer	21	22	20
Demeanor of sales agent	20	23	16
Loyalty incentives (free maintenance, etc.)	20	20	19
Cleanliness and appearance of showroom	18	20	16
0% financing	13	17	10
Convenience of retailer to work	9	12	5
Other (please specify)	9	9	10
None of the above	8	6	10
Source: Mintel, March 2011

Test drives are most important for respondents aged 25-44. These two respondent groups may be checking vehicles out for family use, which means their evaluation covers the needs of not just a single person but also many people, opines the report. Therefore, test drives may be evaluated not just for performance and comfort, but also for safety, roominess, ease of electronics and more.

Purchase Influence of Last New Car Model Purchased (% of Age Group; Within Previous Three Years; Oct., 2010, Internet users 18+)
	All	25-34	35-44	45-54	65+
Test drive	63%	71	67	58	58
Dealer warranty	37	37	31	43	36
Hassle-free environment	28	23	28	31	31
Dealer trade-in amount	27	29	25	22	36
Convenience of retailer to home	22	18	20	23	26
Rebate offer	21	22	19	20	22
Demeanor of sales agent	20	19	14	19	14
Loyalty incentives (free maintenance, etc.)	20	22	13	16	23
Cleanliness and appearance of showroom	18	20	13	20	19
0% financing	13	16	10	13	7
Convenience of retailer to work	9	12	14	7	2
Other (please specify)	9	5	7	16	14
None of the above	8	8	7	7	6
Source: Mintel, March 2011

Respondents from households earning $75K+ are those who are most interested in test drives. More than any other factor, test drives dominate for these respondents most likely because they may be purchasing more expensive vehicles which, by their very nature, have more amenities, opulence and horsepower to check out on the road.

Respondents from higher-income households may also identify themselves more by what they drive. It may matter more to them how they look and feel behind the steering wheel more than respondents from lower-income households who may be purchasing less expensive vehicles for more practical purposes like commuting or errands.

Purchase Influence of Last New Car Model Purchased (% of Respondents By Income; Within Previous Three Years; Oct., 2010, Internet users 18+)
	All	$25K-49.9K	$50K-74.9K	$75K-99.9K	$100K+
Test drive	63%	60	57	65	65
Dealer warranty	37	35	42	33	35
Hassle-free environment	28	25	28	33	27
Dealer trade-in amount	27	30	30	29	25
Convenience of retailer to home	22	21	22	24	21
Rebate offer	21	24	23	20	21
Demeanor of sales agent	20	19	19	22	19
Loyalty incentives (free maintenance, etc.)	20	16	21	23	20
Cleanliness and appearance of showroom	18	23	19	18	16
Convenience of retailer to home	17	20	19	21	12
0% financing	13	9	18	19	12
Convenience of retailer to work	9	8	8	11	9
Other (please specify)	9	12	5	7	12
None of the above	8	7	10	7	8
Source: Mintel, March 2011

Finally, the report concludes that two thirds of buyers agreed that buying American will help drive up the U.S. economy. Domestic automakers can use this to help in their effort to recover from the negative media attention generated by the federal bailouts of General Motors and Chrysler.

Almost two fifths reported that they purchased new because maintenance work on their last vehicle was too expensive. Quality is a message that can be used to capitalize on this finding. Automakers can emphasize that buying new is a long-term investment that may save buyers money considering the maintenance costs associated with holding onto a car with high miles.

For access to additional information from Mintel, including  more details, please visit here.