MADISON, Wis. (7/22/10)--In-market car shoppers indicate they are feeling the economy’s strong influence regarding their attitudes about financing and purchasing vehicles, according to new market research. Since auto loans--both new and used--are credit unions’ bread and butter business, credit unions can expect changes in consumers’ behavior and may have to adapt accordingly. Most in-market shoppers are planning to spend a relatively small amount of money on their next vehicle purchase and are more likely to buy used versus new, said the latest Market Intelligence survey data, by Kelley Blue Book’s Market Intelligence Group. Also, more than one-third of in-market car shoppers say they plan to pay the entire cost of their next vehicle purchase in cash and that they are not influenced by incentive offers (PR Newswire July 20). Nearly three-quarters (74%) of those surveyed said they plan to purchase a vehicle in the next six months. More consumers said they are in the market for a used car (67%) than a new car (33%). In addition, 42% of used-car shoppers and 20% of new-car shoppers said they plan to pay the entire cost of their next vehicle in cash. Most used-car shoppers (62%) plan to spend less than $15,000 on their next vehicle purchase, while half of new-car shoppers plan to spend $25,000, the survey found. The majority (82%) of used-car shoppers and more than half (51%) of new-car shoppers said that incentive offers have no effect on the timing of their next vehicle purchase. In addition, 81% of used-car shoppers and 48% of new-car shoppers said that the availability of incentives have no effect on their specific vehicle choice (make/model). “In-market car shoppers are taking a decidedly conservative approach to car buying right now, which we think can be directly attributed to low consumer confidence in the current economy,” said James Bell, executive market analyst for Kelley Blue Book’s kbb.com. “It seems people are re-assessing their financial situations and deciding to spend less, buy used and pay more often with cash,” he added. “Incentives have loosened their tight grip on the American consumer, with more people deciding to purchase what they can truly afford versus what they can get with over-extended credit lines and incentive offers on the hood from manufacturers.” Of those who intend to finance their next vehicle purchase, 0% financing was listed as the most appealing incentive offer by 30%, followed by low monthly payments at 21%. Also, women were twice as likely as men (32% of women versus 16% of men) to find low monthly payments the most appealing incentive offer. The most popular loan term was 60 months, with 42% of respondents indicating they prefer to finance over five years. Second-most popular was 36 months (21%), followed by 48 months (20%). Eleven percent preferred 72 months, and 5% cited 24 months. More than half (57%) of consumers surveyed intend to research vehicle financing options online, and 50% plan to obtain pre-approval through a bank/credit union. Only 34% said they would obtain financing at the dealership. Shoppers cited control in negotiations as the top motivator (44%) behind financing through a bank/credit union, followed by low interest rates (34%). Shoppers cited convenience (54%) as the primary motivator for financing at the dealership, followed by a low interest rate (32%). The average shopper has three vehicles in his/her consideration set, with 83% of survey respondents say they still are undecided on the make and model of their next vehicle. Younger car shoppers (age 34 and under) are more open to buying either a domestic or import brand (45%), compared with shoppers age 55-plus, who are more likely to decide either a domestic brand (39%) or an import brand (32%). Among both new- and used-car shoppers, price and durability/reliability/quality tied at 33% as the top two deciding factors when considering a vehicle to purchase. The next-highest deciding factor was past experience with the brand (12%). Shoppers said negotiating is a key part of the car-buying process, with 62% indicating they prefer negotiating to having a single set price. That number increases more among younger car buyers, as 73% of respondents age 34 and under say negotiating is a crucial part of the process, compared with 59% in the 35-54 and 55-plus age categories. Forty percent of respondents use the average transaction price (New Car Blue Book Value) as the starting point for vehicle negotiations, while 32% begin negotiating with the dealer invoice price. Only 9% of shoppers indicated they began negotiations with the manufacturer's suggested retail price. Also, consumers (38%) said that if they pay the average transaction price, they have a good deal. The data are based on a survey of 338 in-market car shoppers on Kelley Blue Book's kbb.com from June 18 through June 21.