J.D. Power and Associates Reports: Low Interest Rates and Aggressive Financing Offers Offset Higher Vehicle Prices

WESTLAKE VILLAGE, Calif.--Nov. 1, 2004

Jaguar and Lexus Rank Highest in a Tie in New-Vehicle Sales Satisfaction

Although new-vehicle buyers are paying more for their vehicles compared to 2003, satisfaction with the dealership's vehicle prices has actually increased, due largely to lower interest rates and aggressive financing incentives, according to the J.D. Power and Associates 2004 Sales Satisfaction Index (SSI) Study(SM) released today.

The study finds that the median price paid for a new vehicle in 2004 is $26,000 -- up from $25,500 in 2003. However, the rate of interest on car loans has fallen from an average of 4.8 percent in 2003 to 4.5 percent in 2004. Zero-percent financing, offered mainly by domestic brands, continues to play an important role in the automotive industry. Eleven percent of buyers financed their new vehicle with a 0% interest rate in 2004 compared to 9 percent in 2003. Also, the average length of a new-vehicle loan has increased from 58 months in 2003 to 59 months in 2004.

"The availability of low-interest financing continues to change the way consumers pay for their new vehicles," said Scot Eisenfelder, senior vice president at J.D. Power and Associates. "Buyers are willing to pay a higher sticker price as long as the interest rate is low and they can afford the payments."

The study also finds that customer satisfaction with the vehicle delivery process has declined. Customer ratings with vehicle delivery are particularly lower in terms of the cleanliness of the vehicle, timeliness of delivery and the amount of time the salesperson spends explaining vehicle features.

"At a minimum, customers expect that their new vehicle will be clean and in good condition," said Eisenfelder. "Surprisingly, this is not always the case. Declining gross margins for dealers are placing more pressure on salespeople to make the sale and, consequently, they are too often ignoring delivery. Since delivery is typically the last contact the salesperson has with the customer, this can have a dramatic effect on sales satisfaction with the dealership."

With significant improvements over 2003, Jaguar and Lexus tie to rank highest in sales satisfaction. Both Jaguar and Lexus make the biggest improvements in the areas of dealership facility and price. Jaguar improves its SSI score by 24 points over 2003 and receives particularly strong ratings from customers for the salesperson. Lexus improves 14 index points over 2003, leading the industry in dealership facility and delivery.

HUMMER is the most improved brand in the study, increasing 29 points over 2003. HUMMER, which expanded into the mainstream market with the H2 in 2003, appears to benefit from experience and the easing of typical issues a new brand faces. For example, HUMMER dealerships have eased up on their pricing compared to 2003, when dealerships were able to demand full MSRP or above. HUMMER customers are also more satisfied with the size of the inventory.

The 2004 Sales Satisfaction Index Study is based on responses from 39,335 buyers and lessees of new vehicles. The study, which was fielded in August and September of 2004, provides the automotive industry with a comprehensive analysis of the new-vehicle purchase experience.