New-Vehicle Shoppers Increasingly Reject Newly Launched Models Due to Lack of Incentives

Consumers Cross-Shop Vehicle Segments More than Ever Before

WESTLAKE VILLAGE, Calif.: 30 August 2005 — As consumers become more accustomed to highly publicized manufacturer-sponsored incentives such as the current employee-pricing programs, new-vehicle buyers increasingly reject newly launched models that don’t offer discounts, according to the J.D. Power and Associates 2005 Escaped Shopper StudySM released today.

The study, which analyzes why consumers consider a model, but ultimately purchase a different make or model, finds that shoppers increasingly cite a lack of incentives/rebates as the reason a vehicle is rejected. This is particularly true of all-new launch models, which are often not discounted due to high demand. Twenty-one percent of shoppers rejected a launch vehicle due to a lack of incentives—up from 18 percent in 2004. A lack of incentives is the third-most-cited reason shoppers reject a model, following price and monthly payments.

“The preponderance of rebates and incentives that have been available over the past several years has created an expectation among shoppers that has extended even to launch models,” said Steve Witten, executive director of automotive research at J.D. Power and Associates. “In many cases, the more practical shopper is willing to forego the excitement of buying a newly launched vehicle in favor of a financial incentive.”

The study also finds that with the introduction of numerous crossover models in recent years, more consumers are shopping multiple segments than ever before. For example, more than one-half (54%) of compact car buyers rejected a vehicle in a different segment due to price. Midsize cars are frequently cross-shopped with SUVs, often because of gas mileage concerns with SUV models.

Concern over gas mileage is among the top five reasons shoppers reject a model, often causing them to buy a vehicle in a different segment altogether. Among shoppers who rejected a full-size SUV model due to gas mileage concerns, a large portion (43%) ended up buying a midsize SUV instead, while only 19 percent ultimately bought another full-size SUV.

“While SUVs are still highly popular because of their size and styling, rising gas prices weigh heavily on the minds of new-vehicle shoppers,” said Witten. “An SUV that is affordable and has good gas mileage should be very successful in winning over customers who are currently driving a car, which is why many gravitate toward the smaller SUVs on the market.”

Pickup trucks and SUVs are more frequently rejected than vehicles in any other segment due to gas mileage. Among those who seriously considered a full-size SUV, 43 percent cite gas inefficiency as the top reason for rejection. SUV sales from year to year are directly reflected by consumer concerns. From 2003 to 2004, full-size SUV sales declined by 39,455 units, according to data recorded by the Power Information Network, a division of J.D. Power and Associates. During the same period, sales of midsize SUVs increased by 57,813 units and entry SUVs increased 63,466.

The 2005 Escaped Shopper Study is based on responses from 25,600 new-vehicle owners who were surveyed in May and June 2005.

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

About The McGraw-Hill Companies

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