• by Karl Greenberg , December 12, 2008

Honda is doing the best job of keeping its customers of any company selling vehicles in the U.S. According to J.D. Power and Associates' "2008 Customer Retention Study," 64.7% of Honda buyers are returnees. Second place goes to Toyota with 63.2% and then Toyota's Lexus at 60.4%.

The study measures the percentage of new-vehicle buyers and lessees who replace a previously purchased new vehicle with another from the same brand.

This is the first time in the study's six-year history that Honda has garnered the highest retention rate in the industry. Overall, customer retention among all brands has slipped to 48% from 49% last year. While 13 of the 36 ranked brands have improved in customer retention rates this year versus last, 18 have declined and five have remained stable.

Twenty-five brands fell below average and 11 were above. At the bottom was Jaguar, with 26.2% of buyers who were returnees. Three domestic brands--Cadillac, Chevrolet and Ford--did better than average on retention. Pontiac, Mercury, Buick, Chrysler, Saturn, Dodge, Lincoln, GMC, Jeep, Hummer (in ascending order with Pontiac second to last above Jaguar) had retention scores below average.

Tata's Land Rover brand--number 11 and just above average--posted an 18 percentage point improvement versus last year, which gives it the biggest improvement in customer retention rates from 2007. The study cited incentives, attractive sales deals and the look and styling of Land Rover models.

The study suggests that safety, fuel economy, and deals and incentives are playing a bigger role in keeping consumers in a brand than they did last year.

"Buyers have become increasingly concerned with monetary factors when deciding whether to repurchase a vehicle brand--a reflection of current economic conditions," says Debbie Ortuño, manager of product research and analysis at J.D. Power and Associates.

She says auto marketers should spotlight models that have good fuel economy and low ownership costs, especially for brands cutting new-model introductions and redesigns.

Ortuño says a number of other brands showed improvements in retention rates--including Scion, Mini, VW, and Mercedes, among imports, and Jeep and Chrysler among domestics.

But she said that overall, customer retention rates among domestics are down from 46% last year to 43% in 2008. "The reasons customers give are quality of new vehicles, fuel economy, and resale value," she says.