Jumpstart Automotive Group

Cash-back. Zero percent financing. Employee pricing.

We hear these enticing phrases day after day as auto manufacturers and dealers look for new ways to engage consumers and encourage them that now is actually a good time to buy. Incentive costs are consistently increasing, with the average incentive spend per vehicle sold above $3,100. Are these offers instilling new confidence in consumers? With vehicle sales being down 37% from year-ago levels, it doesn’t appear that they’re having that great of an impact.

To paint the picture, albeit grim, we’re talking about influencing a decision for the second largest purchase that consumers typically make; Now layer onto that our country’s economic situation where the average unemployment rate is nearly 9% and rising, and the domestic auto industry is crumbling before our eyes. Saying consumers are struggling to make these decisions is an understatement, and pushing new vehicles off the lots is not an easy task.

New and innovative incentive programs began to hit the auto industry early in January when Hyundai introduced its Assurance Program, which addressed the lack of consumer confidence in locking themselves into a lease/purchase contract. Hyundai’s Assurance Program would allow a consumer to return their financed or leased vehicle within the first year if they are unable to make a car payment due to misfortune such as unemployment or certain health reasons. This was a phenomenal development in the industry, and one that we followed closely in January and February in an effort to track its effect on consumer shopping behavior. As we suspected, Hyundai shoppers on Jumpstart’s channel of automotive websites increased week over week by 11% to 15%.

Since that announcement, it was clear that the industry as a whole would need to reach consumers and address the fear of committing to such a large purchase when there is so much uncertainty around their jobs and well-beings. GM and Ford were the next to follow suit with the GM Total Confidence Plan and the Ford Advantage Plan, both introducing their programs on March 31, 2009. Each plan also assures customers that they will be protected for a period of time should they involuntarily lose their job.

In the following tables below we take a glance at each of the 3 brands’ weekly share of Jumpstart shoppers prior to- and following their latest incentives. Interestingly, upon GM & Ford’s introduction of their customer protection plans, Hyundai also realized an increase in their share of Jumpstart’s audience, most likely by consumers who were comparing the three programs (Table 1.1).

Table 1.1 Hyundai realizes weekly growth in share of Jumpstart shoppers upon GM & Ford’s customer protection plans

Though Hyundai started the year off strong, it seems that new growth was still achieved as consumers did comparative shopping among the three OEMs who were offering up additional incentives beyond the standard cash back and financing specials.

Ford’s Advantage Plan is most similar to Hyundai’s offering, covering up to twelve months of payments for qualified buyers who lose their jobs. In Table 1.2 below we see that Ford, Lincoln and Mercury all saw tremendous weekly growth in its share of Jumpstart shoppers after announcing its Advantage Plan in the last week of March.

Table 1.2 Ford, Lincoln and Mercury all realize significant growth in weekly share of Jumpstart shoppers following the announcement of the Ford Advantage Plan

GM’s Total Confidence Plan focused on providing similar protection in the event of job loss, however they extended that period to up to twenty four months after the new vehicle lease/purchase, and offered trade in value protection in the event that what was still owed was greater than the actual value of the vehicle. These were two pillars of the program, along with GM’s 5-year, 100,000-mile powertrain warranty and 1 year of family protection (safety and security) through OnStar. With the introduction of this plan, GM brands also saw similar results to Ford & Hyundai during the initial weeks of the programs. Table 1.3 below shows divisional growth in share of Jumpstart shoppers for GM’s key automotive brands. GMC’s share increased by a staggering 77%, while even low volume brands such as Hummer, Saab and Buick all realized significant weekly growth.

Table 1.3 GM divisional share of Jumpstart shoppers by week following the GM Total Confidence customer protection program

For large ticket items especially, consumers have to do their research and think not only about short-term costs, but the long-term value of the product that they’re purchasing. Each of these manufacturers was forced to address customer needs and concerns in a way that they haven’t had to in the past. In the short-term, an increase in consumer shopping interest for these brands online is a good gauge that their attempts were heard loud and clear. The long-term hope is that new vehicle sales and the health of the auto industry grow over the course of the year.